Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKERin the Chair]

PRIVATE BUSINESS

CITY OF WESTMINSTER BILL [Lords]

Motion made, and Question proposed,
That the Promoters of the City of Westminster Bill [Lords] may, notwithstanding anything in the Standing Orders or practice of this House, proceed with the Bill in the present Session; and the Petition for the Bill shall be deemed to have been deposited and all Standing Orders applicable thereto shall be deemed to have been complied with;
That if the Bill is brought from the Lords in the present Session, the Agents for the Bill shall deposit in the Private Bill Office a declaration signed by them stating that the Bill is the same, in every respect, as the Bill which was brought from the Lords in the last Session;
That, as soon as a certificate by one of the Clerks in the Private Bill Office, that such a declaration has been so deposited, has been laid upon the Table of the House, the Bill shall be read the first and second time and committed (and shall be recorded in the Journal of this House as having been so read and committed) and shall be committed to the Chairman of Ways and Means, who shall make such Amendments thereto as were made by him in the last Session, and shall report the Bill as amended to the House forthwith, and the Bill, so amended, shall be ordered to lie upon the Table;
That no further Fees shall be charged in respect of any proceedings on the Bill in respect of which Fees have already been incurred during any previous Session.

Hon. Members: Object.

To be considered again on Thursday 1 February

Oral Answers to Questions — NORTHERN IRELAND

Action for Community Employment

Dr. Godman: To ask the Secretary of State for Northern Ireland what recent representations he has received concerning the funding of action for community employment. [9626]

The Minister of State, Northern Ireland Office (Mr. Michael Ancram): Many representations have been received from the voluntary sector and others concerning the reduction in next year's ACE budget. Unemployment, while still a problem, is no longer the major problem that it was when ACE was introduced and the need to fund temporary jobs has diminished with the improving

economic situation. During the 12 months to September 1995, almost 11,000 new jobs have been created in Northern Ireland.

Dr. Godman: The Northern Ireland Office has a policy of targeting social need, but the decision to cut ACE so savagely flies in the face of that principle. How does the Minister justify that decision? More importantly, will he now reverse it? That would be welcomed in both communities and by all political parties. There must be money somewhere in the Northern Ireland Office budget which would allow him to take such a principled step.

Mr. Ancram: I hear what the hon. Gentleman says, but I am sure that he would agree that it is necessary to reflect changing circumstances when deciding how to allocate resources to maximum benefit. There have been many substantial changes in economic circumstances since the early 1980s when the programme was introduced. That was at a time of very high and rising unemployment, which has now fallen to its lowest level in 14 years. Long-term unemployment has fallen by more than 5,000 and there are 7,500 job vacancies, which is a record level. That suggests that it is right that resources should now be allocated to promote the growth which exists within the Northern Ireland economy and which can provide real long-term and lasting jobs.

Mr. Beggs: I congratulate the hon. Member for Greenock and Port Glasgow (Dr. Godman) on his question and draw the attention of the House to early-day motion 273, which I am pleased to say had the support of all the Northern Ireland political parties and many other parties in the House. The suddenness of the proposed cuts will have a devastating effect on the most vulnerable and disadvantaged in our society, who often live in areas where there is high unemployment and social deprivation. We are concerned that some of the charities that are dependent on ACE workers may be forced to close. Again, the disabled in particular could be further disadvantaged. I appeal to the Minister to undertake to review the damage that is being done. The fact that those who have given commitments are demoralized—

Madam Speaker: Order. I regret to have to call the hon. Gentleman to order, but he is making a statement. I have not yet heard him put a question to the Minister.

Mr. Beggs: May I ask and appeal to the Minister to review the funding to ACE with a view to increasing resources?

Mr. Ancram: I cannot give that undertaking—nor, I suspect would the hon. Gentleman expect me to. However, it has been made clear to ACE providers that they are best placed to decide how to manage the reduction and they have flexibility to ensure that key posts of the kind to which the hon. Gentleman referred are not left unfilled. Real jobs are what all of us involved in Northern Ireland should be looking for, particularly in growth areas such as tourism. Substantial additional resources have been allocated to the growing tourist industry, especially for training. I am sure that the hon. Gentleman will welcome the emphasis being put on training people within the growth areas in the Northern Ireland economy to take on real and long-lasting jobs. That must be our joint objective.

Mr. John Marshall: May I thank my hon. Friend for his first answer and welcome the improvement in the economic situation, which is partly the result of the peace process and partly due to the fact that this country has not signed the social chapter and is not committed to a national minimum wage which would destroy jobs in Northern Ireland as it would elsewhere in the United Kingdom?

Mr. Ancram: I am grateful to my hon. Friend for making that point, which will be accepted by all those who work in the Northern Ireland economy. His point is valid. Peace and the lack of a social chapter have indeed helped to promote economic prospects in Northern Ireland. We are trying to make sure that those prospects are even more enhanced by ensuring that resources are spent in the right areas.

Mr. McGrady: From the replies so far, the Minister appears not to understand the problem being created by the 25 per cent. immediate cut in the budget of the Training and Employment Agency. That 25 per cent. has been translated into cuts of 30 per cent. in the south-east and 15 per cent. elsewhere. When that decision was made, was the Minister aware that it would impact on the elderly, the aged and the sick, and on training in areas where there is no employment, such as the training given by ACE? That will have serious social consequences. If the Minister is not prepared to review that decision, will he provide further finance through the Department of Health and Social Services to replace those services?

Mr. Ancram: If the hon. Gentleman will write to my hon. Friend the Under-Secretary of State, who is responsible for health and social services, I am sure that my hon. Friend will respond. Indeed, my hon. Friend will have heard what the hon. Gentleman has just said. The reduction is not an abandonment of the programme. It was made because it was felt that at this point in the economic circumstances of Northern Ireland resources could be better applied in ways that would create real and lasting jobs. I am sure that the hon. Gentleman and other Northern Ireland Members would criticise the Government if we did not seek to promote the growth that now exists in Northern Ireland.

Mr. Illsley: I accept that unemployment has fallen, but in Northern Ireland it is still more than 11 per cent. The key figure is that 55 per cent. have been out of work for more than a year. With the fragility—

Madam Speaker: Order. I must instruct the House that this is Question Time and not the time to make statements. We must have questions to Ministers. We have been going for nearly 10 minutes and we have not yet finished question No. 1. I want questions to Ministers and brief answers to them.

Mr. Illsley: In view of the fragility of the Northern Ireland economy, as evidenced by the problems at Shorts, does the Minister consider that the decision to cut ACE funding is at least premature? Should he not redirect—or restore—that finance to the long-term unemployed?

Mr. Ancram: I shall be as brief as I can, Madam Speaker. That is exactly what the Government seek to do in promoting growth in the Northern Ireland economy.

I re-emphasise that unfilled job vacancies are running at record levels—a situation on which I would hope that the hon. Gentleman would congratulate the Government.

Arms and Explosives

2. Dr. Spink: To ask the Secretary of State for Northern Ireland what progress has been made in respect of the decommissioning of illegally held arms and explosives in Northern Ireland. [9627]

The Secretary of State for Northern Ireland (Sir Patrick Mayhew): No illegal arms or explosives have yet been decommissioned by any paramilitary organisation. That is deplorable. The international body said that total and verifiable disarmament of all paramilitary organisations must continue to be a principal objective. It recommended the acceptance of that as a principle. We accepted it at once with all the other recommendations in the report. All others should now do the same.

Dr. Spink: Is it not a fact that decommissioning remains an option? If some arms were decommissioned even now, we could progress to all-party talks, which might still be the best way forward. Does my right hon. and learned Friend agree that the Mitchell report showed that the only obstacle to decommissioning is the mind set of Sinn Fein and the IRA?

Sir Patrick Mayhew: It is, indeed, an option. It is more than an option—it is a duty. I believe that if that option were taken and that duty fulfilled we could proceed to all-party negotiations, which is the objective of everyone, in a very short time indeed. I hope very much, in the light of the report, that that course will now he taken.

Mr. Maginnis: As Sinn Fein-IRA appear unable to rehabilitate themselves to the normality of democratic politics and summarily reject accommodations offered by the Government, the Ulster Unionists and now the Mitchell Commission and, in defiance of 83 per cent. of society in Northern Ireland—which includes 75 per cent. of Social Democratic and Labour party supporters—refuse to decommission a single gun, is it not depressing to find Tanaiste Dick Spring and the leader of the SDLP whingeing and whining about the Government's latest offer to establish a mandated forum which might advance progress towards peace?

Sir Patrick Mayhew: It is important that Sinn Fein and other parties associated with the paramilitary organisations should be pressed to say whether they accept the principles recommended by the report—especially the second of those principles, which is total disarmament of all paramilitary organisations.. On the proposal for an election, it is worth reminding the House that in the communiqué at the end of November setting up the political and disarmament tracks the two Governments expressly envisaged that in preparatory and political talks the question of what part an elected body might play would be specifically mentioned. So it is not some new idea summoned out of the ether in the past minute or two. As my right hon. Friend the Prime Minister said yesterday, it represents a way by which the necessary confidence can be achieved and I hope that it will receive careful consideration.

Rev. William McCrea: Does the Secretary of State agree with the principle that there can be no guns on the


table, under the table or outside the door if lasting peace is to be established in Northern Ireland? Has he carefully studied the recent poll, which showed that 83 per cent. of people in Northern Ireland demand the removal of all terrorist weapons from the equation? What steps will he take to press the Dublin Government to act on the known arms dumps in the Irish Republic, which were created prior to the IRA ceasefire?

Sir Patrick Mayhew: I am confident that the Irish Government are as anxious to discover illegal arms dumps as the British Government are—and that is very anxious indeed. I have studied the report and agree that it is extremely important that public opinion is shown to be in line with what the hon. Gentleman has just said, and in line with support for an elective process to play a part in our current problems. That should give reassurance.

Mr. Mallon: Will the Secretary of State confirm that both the Irish and British Governments jointly appointed the Mitchell Commission to give an objective assessment on how the decommissioning issue would be dealt with? His Government have now rejected the Mitchell report's central recommendation in paragraph 34 and have unilaterally and shamelessly moved away and reneged on the agreement with the Irish Government to pursue the matter through all-party talks in the twin-track approach. How will decommissioning be tackled now that the Secretary of State has sacrificed potential consensus for expediency within this House?

Sir Patrick Mayhew: I am afraid that I am not with the hon. Gentleman on any of that. The Government have not rejected the Mitchell report but have welcomed it. We immediately adopted all the recommendations of principle that it put forward. We welcome especially the report's identification of confidence as the central requirement. All-party negotiations could begin in fulfilment of the Government's aim by the end of February, provided that a start is made on decommissioning. If that does not happen—and we are told that it will not—it is the duty of Governments to see whether confidence can be engendered in some other way. I want that issue urgently debated in the twin-track process. That is what is suggested.

Mr. Day: Does my right hon. and learned Friend agree that although everyone in the House hopes for the day when all parties in Northern Ireland will seek the path of peace and sign up to the six points of principle laid out in the recent report, such declarations count for nothing in practice until the people holding arms give them up? Will the Secretary of State take the opportunity to call for all parties to give up arms now—not just to make declarations, but actually to hand the arms over?

Sir Patrick Mayhew: I very much agree with what my hon. Friend says. Putting it in a cliché, actions speak louder than words. That was put in slightly different language by the Mitchell report, when it said that if those principles, which include the total disarmament of all paramilitary arms, were adopted and honoured, there would be a tremendous accretion of confidence and progress. I very much agree with that.

Ms Mowlam: Continuing our bipartisan approach, may I joint the Secretary of State in welcoming the report of

Senator Mitchell and his colleagues? Yesterday, discussing the report, Members on both sides of the House emphasised the need for trust and confidence. Today there is a worrying air of distrust and a lack of confidence among some Members of the House and among some communities in Northern Ireland. To help to allay some of those fears, can the Secretary of State confirm to the House today that he will consider all options proposed to take the process forward, including making a start on decommissioning, and that movement towards an elective process, in line with paragraph 56 of the Mitchell report, will go ahead only with the widespread agreement of the parties in Northern Ireland?

Sir Patrick Mayhew: We have always made it clear that there can be no imposition if any solution that is proposed is to stick. I make that clear again.
The hon. Lady is right that in that paragraph the report states:
Elections held in accordance with democratic principles express and reflect the popular will.
There are other signs of that in the poll that has been mentioned. The report continues:
If it were broadly acceptable, with an appropriate mandate, and within the"—
three-party—
structure, an elective process could contribute to the building of confidence.
We endorse that. I hope very much that that, on reflection, will be seen to be a way around the impasse represented by the refusal of paramilitaries even to start giving up their arms.

Health and Social Service Funding

Rev. Martin Smyth: To ask the Secretary of State for Northern Ireland what representations he has received from health and social services boards and health and social services trusts on the financial proposals for next year and the impact on services. [9628]

The Parliamentary Under-Secretary of State for Northern Ireland (Mr. Malcolm Moss): Boards, trusts and agencies were asked for their views. These have now been received and I am considering them carefully. I shall also be meeting board and trust chairmen in the next two weeks. I hope to make an announcement as soon as possible after that time.

Rev. Martin Smyth: I thank the Minister for that response. Does he accept that a 3 per cent. up-front saving would have an impact on health provision in the Province, especially coming after years of taking the fat out of the system? Does the Minister acknowledge that it may lead to increases in waiting lists, especially as elective surgery may be targeted?

Mr. Moss: The 3 per cent. efficiency saving that we are asking the boards to consider this year is similar to the percentage amount that they have been saving in previous years, and I have no reason at this stage to doubt that they can do so again. However, until I have read their submissions I cannot determine whether any cuts in services will occur.

Mr. Ian Bruce: Is Northern Ireland getting its fair share of health resources from the central Exchequer to


look after health services? Has my hon. Friend had a chance to compare the amount of money from the central Exchequer given to health services in Northern Ireland with the amount given in the south, and to discover whether there is a flow of people from the south trying to take advantage of any difference?

Mr. Moss: I have no comment to make on comparisons with the Republic of Ireland. I believe that in the past decade people in Northern Ireland have enjoyed a greater than average per capita spend on health. I am delighted to report to the House that, despite a reasonably tight public expenditure round, the total resources to be spent on health in the coming year will increase in real terms compared with last year.

Dr. Hendron: The Secretary of State and the Minister will be aware of the McKenna report on the rationalisation of services between the Royal Group of Hospitals and Dental Hospitals trust and the Belfast City hospital trust, and they will know that the report contains a proposal to close the Royal Maternity hospital. Is the Minister aware that there is great anger among my constituents—both Catholic and Protestant people of west and north Belfast—that such a proposal is being made, bearing in mind that the Royal Maternity hospital contains a neo-natal unit which serves not only Belfast, but the whole north of Ireland?

Mr. Moss: I am well aware of the contentious nature of the proposals in Dr. McKenna's report, but that is the third tranche of proposals. Most of the proposals in the other two reports have been agreed internally by consultants. The whole report is out to consultation and no decisions have been taken. It is important for the hon. Gentleman to refer to the truth of the matter, which is that two maternity units are to amalgamate—we are not closing one.

Mr. Dowd: Is the Minister aware that the current position in acute care in Northern Ireland is already intolerable and that he has succeeded in uniting all shades of political opinion against the Government's stewardship? Does he agree with the recent statement of the chairman of the British Medical Association's Northern Ireland council that the Government have
withdrawn beds to such an extent that we've reached a critical point"?
Does that not demonstrate beyond doubt that the crisis created by the bed shortages is every bit as serious in Northern Ireland as in the rest of the national health service?

Mr. Moss: I do not agree with the statement by the BMA spokesperson and I do not believe that there is a crisis in acute bed provision in Northern Ireland. If there are shortages in individual hospitals, I shall ask for an immediate report on them.

Direct Action Against Drugs

Mr. John Greenway: To ask the Secretary of State for Northern Ireland what additional measures are being taken in response to the recent murders attributed to the Direct Action Against Drugs organisation. [9629]

The Minister of State, Northern Ireland Office (Sir John Wheeler): While operational policing is a

matter for the Chief Constable of the Royal Ulster Constabulary, I can state that in mid-December last year a team of detectives, headed by a chief superintendent, was formed to investigate murders which have been claimed by a group calling itself Direct Action Against Drugs; there have been seven murders procured by the provisional IRA under that flag of convenience. The RUC team has all the resources that it requires.

Mr. Greenway: Does my right hon. Friend agree that, in the light of what he has just said—and of the Mitchell Commission's recommendations announced yesterday that punishment killings should cease immediately—it behoves IRA-Sinn Fein not just to condemn the recent killings, but to take direct action to prevent further murders?

Sir John Wheeler: I am grateful to my hon. Friend. The Mitchell report noted that the key to progress is confidence. My hon. Friend is right when he questions how people can have confidence when the provisional IRA is beating and murdering people and Sinn Fein refuses to condemn that. An important measure for establishing confidence will be the speed and conviction with which the parties demonstrate and honour—and I stress honour—their commitment to the six Mitchell principles, one of which is the disposal of weapons and semtex.

Peace Process

5. Mr. Wareing: To ask the Secretary of State for Northern Ireland if he will make a statement on his preparations for the first round of all-party talks on Northern Ireland. [9630]

Mrs. Bridget Prentice: To ask the Secretary of State for Northern Ireland if he will make a statement on progress towards substantive political negotiations involving all parties in Northern Ireland.[9636]

Sir Patrick Mayhew: The Government have now had bilateral meetings with all the relevant parties to discuss their ideas on the way forward, although the meeting with the Democratic Unionist party was not part of the twin-track process. Meetings involving both the British and Irish Governments have also taken place separately with the Alliance party, the Social Democratic and Labour party and Sinn Fein. Further meetings are planned with the continuing aim of reaching agreement on a basis for launching all-party negotiations by the end of February.

Mr. Wareing: Does the Secretary of State agree that no obstacles should be placed in the way of all-party talks to perpetuate the peace in Northern Ireland? As Mr. Dick Spring made it clear this morning that the holding of elections was not broadly acceptable, is it not true to say that the holding of such elections, with an Assembly, at an early stage before all-party talks, would be unacceptable and would threaten the peace? When was Mr. Bruton informed of the Prime Minister's proposal which was made in the House yesterday?

Sir Patrick Mayhew: What we are seeking, as my right hon. Friend the Prime Minister explained yesterday, may well be described as elections to all-party talks. I agree with the hon. Gentleman, of course, that no one


should put obstacles in the way of progress towards peace. It is precisely in order to circumvent the obstacle represented by the fact that the paramilitaries are not willing even to begin to decommission their illegal arms that my right hon. Friend the Prime Minister announced yesterday that we think it very desirable that there should be urgent consideration of the question of an election. That represents the way forward.
In answer to the last part of the hon. Gentleman's question, my right hon. Friend the Prime Minister had a conversation, which lasted some 35 minutes, with Mr. Bruton late on Sunday night. It was made clear to Mr. Bruton that we saw the elections as an opportunity to get the parties around the table. We did not see any other way of doing that in the light of the report.

Mrs. Prentice: The Secretary of State will, of course, be aware that there is a marked lack of trust and confidence among some parts of the community in Northern Ireland about such elections and what they will establish. Can he tell the House what measures he could take which might build trust and confidence among those communities so that they might wish to participate in such elections?

Sir Patrick Mayhew: The most important objective is to allay the nationalists' traditional and classic misgivings that the elections are intended as a way back to a Stormont regime.
May I correct what I just said to the hon. Member for Liverpool, West Derby (Mr. Wareing)? The conversation did not take place on Sunday, but on Monday night.
There is a traditional feeling that elections are sought as a way back to a Stormont regime. As I understand it, everyone who has brought forward that proposal has made it clear that that is regarded as quite impossible and is not intended at all. It would be quite impossible. Once that fact is hoisted in and accepted, I believe that the notion of elections will become much more acceptable. I hope that that will be the case.

Mr. Hunter: With regard to decommissioning and the elective process in parallel, will my right hon. and learned Friend confirm that it is envisaged that the Northern Ireland parties would agree to the remit of an elected body, and also that that elected body would not have legislative or administrative powers? Surely such considerations would greatly reassure those who fear the return of Stormont.

Sir Patrick Mayhew: I am grateful to my hon. Friend. That is an important point. The situation now is substantially different from the two occasions in the 1970s and 1980s when elections took place without altogether successful results. What is now being envisaged is not a body with legislative or administrative powers, but something quite separate and in the context of inclusive all-party negotiations. That is very different indeed.
I am terribly sorry—I said that the conversation between my right hon. Friend the Prime Minister and Mr. Bruton was on Monday, but I am reminded by the Minister of State, my hon. Friend the Member for Devizes (Mr. Ancram), that it was on Tuesday night. It was on the evening before the statement—there is no advance on that.

Sir Patrick Cormack: Does my right hon. and learned Friend agree that it is incumbent on all those who have

any misgivings about the elections to do everything possible, in public and in private, to urge those who hold the weapons to give them up?

Sir Patrick Mayhew: I believe that my hon. Friend is right about that. If independent and impartial corroboration and support for that is needed, it is to be found in the Mitchell report.

Mr. Hume: Will the Secretary of State tell the House whether the Government are still committed to their agreement with the Irish Government that the target date for all-party talks is the end of February? In order to achieve that, will the Secretary of State implement the only major proposal of the Mitchell report, which is that all parties be invited to such talks provided that they accept and commit themselves to the six principles contained in the Mitchell report?
Sir Patrick Mayhew: It remains the firm aim of Governments that all-party negotiations or all-party talks should begin by the end of February. I reaffirm that fact, but I cannot command it; I cannot require and compel people to come who will not come. As I have said to the House on many occasions, if I were to try to do that and to summon talks in the sure and certain knowledge that people would not be there, I would destroy the very process upon which all progress depends.
I happen to know—it has been made perfectly clear to me—that Unionists would not attend the talks according to the terms advanced by Mitchell. Therefore, we want to secure the confidence that will ensure that people attend the talks, and I believe that that confidence will be found in the alternative route of elections.

Mr. John D. Taylor: Most people in Northern Ireland welcome the measured approach of the Labour party and the Liberal Democrats to the Government's proposal for an elected body. However, does the Secretary of State understand that there was considerable disappointment in Northern Ireland last night at the negative response emanating from certain quarters in Dublin? Will he arrange an urgent meeting with the Dublin Government to make it clear to them that the peace convention—as I prefer to call it—is not an internal settlement, but will address many issues? All parties involved will address many issues, including cross-border relations and enhancing relations between Belfast and Dublin.

Sir Patrick Mayhew: The reassurance of which the right hon. Gentleman speaks is to be found in the way that he describes. I think that there is a strong case for all interested parties and Governments to talk together "intensively"—to use the word employed. in the communiqué. I believe that that is no less true after the publication of the Mitchell report than before it.

Mr. Worthington: If there is general agreement about an elective process, as the Prime Minister proposed yesterday, will the Secretary of State give an assurance that the purpose of that electoral process is to lead directly to all-party talks in which the interests of all minority parties are safeguarded fully? Will the Secretary of State describe how he believes that that safeguarding will be achieved?

Sir Patrick Mayhew: That is right. It is very important that any settlement that is achieved should attract


widespread support. It can be arrived at only by way of a process in which all democratically mandated parties—including those representing quite small minority groups—have a part to play. I agree with the hon. Gentleman: that is the only viable way forward and we now wish to see it proceed.

Company Relocations

6. Mr. Charles Kennedy: To ask the Secretary of State for Northern Ireland what account he takes, in encouraging companies to locate in Northern Ireland, of the extent to which such location affects companies in other parts of the United Kingdom; and if he will make a statement. [9631]

Mr. Ancram: The rules applied in Northern Ireland for assessing the displacement effect of selective financial assistance support are exactly the same as those applied in all other parts of the United Kingdom.

Mr. Kennedy: As the Minister is aware—through the information that I have provided to his office and, by way of courtesy, also made available to the hon. Member for East Londonderry (Mr. Ross), in whose constituency the Benelux Manufacturing (NI) Ltd. production plant is located—a company in my constituency, Zonal Audio Plastics, is concerned about a contravention of the assurances that Benelux gave to the Industrial Development Board when the plant received support to locate in Northern Ireland. Instead of concentrating on exporting to the north American market, Benelux has severely undercut mainland competitors—not least the company in Invergordon, which employs between 40 and 60 people—in the United Kingdom and the European markets. Will the Minister comment further on that existing genuine business dilemma?

Mr. Ancram: The Industrial Development Board, when appraising the project, analysed the existing markets in the United States and in Europe for CD jewel boxes, the forecast for growth in those markets, and the impact that the project would have on existing United Kingdom manufacturers. In deciding to assist the project, the IDB ensured that it properly addressed the relevant criteria for the provision of selective financial assistance.

Sir James Molyneaux: Does the Minister agree that companies in all parts of the United Kingdom could benefit greatly from the promotion of the enterprise investment scheme, which has the potential to bring together companies who have money to invest and companies—particularly small companies—which are desperately in need of funding? In that regard and in the light of the problems affecting the Fokker aircraft company, will the Minister do all that he can to ensure that sympathetic consideration is given to Ministry of Defence tenders from Shorts of Belfast?

Mr. Ancram: I agree with the first part of the right hon. Gentleman's question, and I am grateful to him for reminding the House and United Kingdom businesses of it. In relation to the second part of his question, we share his concerns about the situation that Shorts faces. I know that my colleagues in the MOD are sympathetic to Shorts'

concerns, and I will ensure that what the right hon. Gentleman has to say is passed on to my right hon. Friend the Secretary of State for Defence.

Mr. Spring: First, I offer my warmest congratulations to my right hon. Friend. Does he agree that one of the spin-offs of the location of so many companies in Northern Ireland and of inward investment is that manufacturing output is rising at twice the level of the United Kingdom overall, that exports have risen by more than 25 per cent. in the past three years, and that, as a consequence, unemployment is now down to the lowest level for more than fourteen and a half years?

Mr. Ancram: I am grateful to my hon. Friend for his initial remarks and for the points that he raised. It is important to appreciate and to welcome the fact that, since the ceasefires last year, 6,000 jobs have been promoted by the IDB, of which more than 4,000 were generated by inward investment. In the financial year 1994–95, Northern Ireland attracted three times its per capita share of new inward investment jobs into the United Kingdom.

International Fund for Ireland

Mr. William Ross: To ask the Secretary of State for Northern Ireland what assessment he has made of whether sums expended by the international fund for Ireland are targeted at those in greatest need. [9632]

Sir John Wheeler: Her Majesty's Government are kept fully appraised of the work of the fund through the advisory committee of senior officials, who, in turn, advise the fund's independent board. On the facts as advised to me, I am satisfied that the fund targets those in greatest need through its focus on disadvantaged areas, where some 70 per cent. of its resources are spent.

Mr. Ross: Is the Minister aware that whenever an application is made to the Housing Executive for a grant to repair a house, the applicant is means tested, but that no such means test applies when an individual, no matter how wealthy—and some of them are—applies for a grant to erect a dwelling or dwellings on derelict sites? Surely that is a total waste of public funds, since many of those sites could be sold profitably on the open market. Will the Minister arrange for serious consideration to be given to those matters?

Sir John Wheeler: The international fund is independent. As I understand it, it has helped to establish some 23,000 jobs in Northern Ireland and provides funding to a variety of organisations, including, the hon. Gentleman will be glad to note, some £330,000 to the Limavady small business agency in his constituency. I take note of what he says and I will ensure that the chairman of the fund is informed of his concern.

Drug Trafficking

Mr. McAvoy: To ask the Secretary of State for Northern Ireland how many (a) arrests and (b) convictions have been made on charges of alleged drug trafficking offences in Northern Ireland for each of the last three years. [9633]

Sir John Wheeler: The Royal Ulster Constabulary drugs squad collates figures showing the total number of


persons arrested for all types of drugs offences. It is not possible to identify separately how many were arrested for drugs trafficking offences. There were a total of 610 arrests in 1992; 976 in 1993; and 1,196 in 1994. The number of convictions for drugs trafficking offences were 29 in 1992; 110 in 1993; and 116 in 1994.

Mr. McAvoy: Does the Minister accept that the increase in those on-going figures shows the developing nature of the real problem of drug abuse in Northern Ireland? Many voluntary groups tackle drug abuse in Northern Ireland, such as the Northlands project in Londonderry/Derry, and Dunlewey, Contact Youth and Panda in Belfast. Those organisations receive some funding from the Government, but, in view of the need to tackle the problem on an overall basis, will he seriously consider increasing Government funding of those organisations?

Sir John Wheeler: I am glad to tell the hon. Gentleman that I shortly expect to make a visit to the Northlands project so that I can see for myself the quality and extent of the work being done. I shall be visiting other projects too. In recognition of the growth of the drugs problem in Northern Ireland, funding has been increased to assist in education on the drug habit and its prevention. In addition, the RUC establishment has been greatly increased to prevent such offences.

Oral Answers to Questions — PRIME MINISTER

Engagements

Mr. Sheerman: To ask the Prime Minister if he will list his official engagements for Thursday 25 January. [9656]

The Prime Minister (Mr. John Major): This morning, I presided at a meeting of the Cabinet and had meetings with ministerial colleagues and others. In addition to my duties in the House, I shall be having /further meetings later today.

Mr. Sheerman: Will the Prime Minister join me in congratulating the director general of the Confederation of British Industry, who said today:
It is blindingly obvious that we must develop a framework"—

Madam Speaker: Order. There should be no quoting during questions.

Mr. Sheerman: The director general said that we must develop a framework for involving employees at every level—dare I say it, a stakeholder economy. If it is blindingly obvious to the director general of the CBI, why is it not blindingly obvious to the Prime Minister that the reason why his Government are so deeply unpopular is that they have failed to give the British people a proper stake in their own country?

The Prime Minister: If I may say so to the hon. Gentleman, he should be cautious about quoting the CBI at me. The CBI opposes the social chapter, the minimum wage and most of the policies advocated by the Opposition. When we and the director general of the CBI

talk about stakeholders, we do not mean what the hon. Gentleman means. We know who Labour's stakeholders are. We know who owns 50 per cent. of the votes at the Labour party conference. We know who pays 50 per cent. of the money that the Labour party gets. We know what has been said by senior trade unionists. They have made it clear. While they continue to fund the party they will have a say. It is simple—no say, no pay. They are Labour's stakeholders.

Mrs. Ann Winterton: Does my right hon. Friend agree that the continuing campaign of violence by the IRA and Sinn Fein has betrayed the peace process? Will he urge them now to accept the Mitchell report's recommendation and cease their heinous actions immediately? Furthermore, does he agree that if peace is to continue long term in Northern Ireland, the IRA and Sinn Fein have two clear options open to them? They can either begin immediately to decommission weapons or they can agree to take part in the democratic process, as outlined by my right hon. Friend yesterday.

The Prime Minister: Yes, of course, my hon. Friend is right in all she says. The point made by the Mitchell Commission about the decommissioning of weapons was that Sinn Fein-IRA would not decommission, not that they could not decommission. We still look forward to hearing from Sinn Fein-IRA whether they accept the other elements of the Mitchell report—whether they accept the six principles and the fact that they must condemn and stop for good punishment beatings and punishment killings. We still await a comprehensive response from them on those matters. I should like to start all-party talks as speedily as possible, but I cannot be clearer to the House than this—the impediment to all-party talks is and has been the unwillingness of Sinn Fein-IRA to begin the decommissioning of their arms. If they would begin the decommissioning of their arms, there would be no justification for any party not to attend and join in all-party talks leading to negotiations.

Mr. Blair: Does the Prime Minister agree that the test results for 11-year-olds in English and maths are appalling? May I put to him the following proposals for improvement? I propose an end to the delay in base-line assessment for five-year-olds, a reduction in class sizes for five-to-seven-year-olds, a register of national head teachers, the use of associate teachers in classrooms and a reinstatement of the reading recovery programme for primary school children which was so wrongly scrapped. Will the Prime Minister at least consider those proposals?

The Prime Minister: Let me say first that we have looked very carefully at the test results. Those of 11-year-olds are disappointing; those of other age groups are better. The point that the right hon. Gentleman and the House need to bear in mind—I am glad that the right hon. Gentleman has apparently changed his policy on this—is that, as he will recall, the Labour party opposed the introduction of the tests, and he personally voted against it. We introduced the tests precisely to throw up the shortcomings that we believed were probably in the education system. The test results are very useful: they tell us where the shortcomings are so that we may deal with them, and we shall consider a range of measures with which to deal with them.
I do not intend to respond immediately to the ideas that the right hon. Gentleman has produced, but we established the tests so that we could identify shortcomings and then put them right. I am glad that the right hon. Gentleman now acknowledges—better late than never—that we were right to introduce those tests.

Mr. Blair: Was that not a complacent reply? Will the Prime Minister confirm that the problem does not relate merely to 11-year-olds? The GCSE results a few weeks ago also showed a decline. May I put it to the Prime Minister that, although the Secretary of State for Education and Employment may boast about the results for 14-year-olds today, those results still show an appalling level of failure in key curriculum subjects?
May I remind Conservative Members that these are children who were born under a Conservative Government, sent to school under a Conservative Government and educated under a Conservative Government? The failure is not theirs, but the Conservative Government's.

The Prime Minister: If it is the Conservative Government who have failed, perhaps the right hon. Gentleman could explain why some of his right hon. Friends remove their children from Labour education authorities and have them educated under Conservative education authorities. While we are on the subject of the 16 years, perhaps he would also register the fact that in 1979 fewer than a quarter of pupils obtained five GCSEs; today the figure is 43 per cent. In 1979, 14 per cent. obtained two A-levels; now the figure is twice as high. In 1979, one in eight young people went to university; now, one in three do so.
The right hon. Gentleman referred to class sizes. I will tell him about class sizes. The Office of Standards in Education has itself recognised that the quality of teaching is the important issue. The right hon. Gentleman shakes his head, but parents agree. I shall give him an illustration. For example, for children up to the age of 16, the average class size in secondary schools in Islington is lower than at the London Oratory.[Interruption.]

Madam Speaker: Order.

Mr. Blair: There it is. The Government do not want to answer questions about the test results, and now we see the reason why they want to focus attention on one 11-year-old child—[Interruption.] The reason why they want to focus attention on one 11-year-old child is to conceal the damage that they have done to millions of our children.

The Prime Minister: The right hon. Gentleman will really have to learn to keep cool under pressure. If he casts his mind back, he may remember the episode of Jennifer's ear before the last election, and if he wants to talk about records and standards in education, he may remember that his deputy leader said that school performance tables are "political propaganda". Test results are "virtually worthless", said the hon. Member for Dewsbury (Mrs. Taylor). Tests encourage "a climate of failure" said the hon. Member for Dewsbury. They say that grant-maintained schools are wrong, but they are perfectly happy to use them. The fact of the matter is that Labour Members enjoy choice themselves, but they wish to deny it to other people.

Sir Hector Monro: Is my right hon. Friend aware, which I am sure he is, that today is the anniversary of the birth of Robert Burns who lived the latter part of his short and remarkable life in Dumfries? [Interruption.]

Madam Speaker: Order. The House must come to order. I cannot hear the right hon. Gentleman, nor can the Prime Minister.

Sir Hector Monro: Is my right hon. Friend further aware that, this year, Scotland and countries further afield will be commemorating the 200th anniversary of the great poet's death? Will he send to Scotland, to the Burns Federation and to his drouthy cronies in the House a message of good will on his important bicentenary?

The Prime Minister: rose—[Interruption.] The deputy leader of the Opposition is heckling again. I must explain to the House that, despite occasional differences between us, the Leader of the Opposition and I have one thing in common: neither of us invites the deputy leader to meetings.
As to the remarkable anniversary referred to by my right hon. Friend the Member for Dumfries (Sir H. Monro), he is wise to mention it. I am a great admirer of Rabbie Burns and I should like to explain why by quoting what he said. His view on the constitution, for example—to be wrecked by the Labour party, if it came to power—was clear:
As to Reform Principles, 1 look upon the British Constitution … to be the most glorious Constitution on earth, or that perhaps the wit of man can frame.
That was Rabbie Burns's view. The Scottish National party might remember that and so might the Leader of the Opposition and his party.

Mr. Jamieson: To ask the Prime Minister if he will list his official engagements for Thursday 25 January. [9657]

The Prime Minister: I refer the hon. Gentleman to the reply I gave some moments ago.

Mr. Jamieson: During national empty homes week, in a fortnight's time, what advice will the Prime Minister be giving to the Ministry of Defence about the 552 empty married quarters in his own Huntingdon constituency?

The Prime Minister: At the moment, I should tell the hon. Gentleman two things. First, we shall be looking at the ways in which we can dispose of empty Ministry of Defence properties—we are determined to do that. Secondly, if the Labour-controlled authorities in London filled up their empty accommodation, they could wipe out homelessness in London at a stroke. In Southwark, Islington, Hackney and right across London, Labour-controlled authorities have an appalling record of keeping homes empty and then complaining about homelessness—as the hon. Gentleman has done. That is another illustration of Labour's hypocrisy. They make claims about something—they have the power in their hands to put it right, but don't.

Mr. Sheerman: On the ropes again, John.

The Prime Minister: I now have a definition of hope over optimism.

Mr. Hendry: To ask the Prime Minister if he will list his official engagements for Thursday 25 January. [9658]

The Prime Minister: I refer my hon. Friend to the answer I gave some moments ago.

Mr. Hendry: Does my right hon. Friend agree that GP fundholding has brought enormous benefits to doctors and patients alike, especially in my constituency, in which

they cover some 90 per cent. of the population? Is not it typical of the say one thing, do another Labour party that, while many of them take advantage of GP fundholding for themselves and their families, at a moment's notice, they would abolish it? Is not that typical of the hypocrisy of the modern Labour party?

The Prime Minister: I think that there is now overwhelming evidence that fundholders are able to get a better deal for their patients from hospitals. It makes sense to build on what has been achieved and induce more and more GPs to join the system—[Interruption.] I am sorry to hear cries of objection from the Opposition Benches. Those are not my words but the words of the vice-president of the Fabian Society and former adviser to Barbara Castle.

Business of the House

Mrs. Ann Taylor: Will the Leader of the House provide details of future business?

The Lord President of the Council and Leader of the House of Commons (Mr. Tony Newton): The business for next week will be as follows:
MONDAY 29 JANUARY—Second Reading of the
Housing Bill.
TUESDAY 30 JANUARY—Opposition Day (3rd Allotted Day). Until about 7 o'clock, there will be a debate on the record of the privatised water companies, followed by a debate entitled "The Cuts in Overseas Aid". Both debates will arise on an Opposition motion.
Motion on the Police Grant Report (England and Wales).
WEDNESDAY 31 JANUARY—Until 2 o'clock, there will be debates on the motion for the Adjournment of the House.
Motions on the English revenue support grant reports.
Details will be given in the Official Report.
THURSDAY 1 FEBRUARY—Debate on the Royal Navy on a motion for the Adjournment of the House.
FRIDAY 2 FEBRUARY—Private Members' Bills.
MONDAY 5 FEBRUARY—Debate on policing of London on a motion for the Adjournment of the House.
[Wednesday 31 January:
The following reports are relevant:
The Local Government Finance Report (England) (1996–97); the National Parks Supplementary Grant Report (England) 1996–97); the Limitation of Council Tax and Precepts (Relevant Notional Amounts) Report (England) 1996–97); Special Grant Report (No. 16).]
I am afraid that I am not able to be as forthcoming as I should like to be this week about the following three days-6, 7 and 8 February—but I hope to provide an Opposition day, and it may be necessary to take Government business on Thursday 8 February.
On Friday 9 February, the business will be Private Members' Bills.

Mrs. Taylor: I thank the Leader of the House for that information, and also for responding to our request for a separate debate on the police grant report on Tuesday. In the past, the Leader of the House has also made favourable noises about the desirability of a debate in this Session on further changes to our parliamentary procedures. When I last raised the matter, the right hon. Gentleman was not unsympathetic. I wonder whether he has any further thoughts on what he might do to find time for a wide-ranging debate, which might lead to further improvements in the workings of the House following the changes that we have already made with the Jopling report.
I asked for that especially so that we might consider one aspect of the changes required, to which I have referred during the previous two business question sessions. The right hon. Gentleman will recall that in each of those two sessions I asked about plans to provide time for a debate on the EC directives that the Scrutiny Committee unanimously recommended should be debated on the Floor of the House. I refer in particular to economic

and monetary union, convergence and social protection. Having had two weeks to consider, can he now tell us when the issues might be debated? Can he also tell us the timetable for the publication of the Government's White Paper and any subsequent debate that should take place in the House?
We heard this week—though not through any announcement in the House—that the Government are retreating from their plans to introduce identity cards. The position has moved from the Prime Minister believing that they should be compulsory, to the Home Secretary saying that they should be voluntary, to nothing at all. Will the right hon. Gentleman confirm that that is the Government's position? Will he further confirm that Ministers have suggested that other forms of identity cards, such as those proposed for driving licences and Department of Social Security purposes, do not require legislation? If that is the case, and if the Government are proposing to introduce such measures without legislation, would not it be wise—indeed, proper—to provide a mechanism to gain parliamentary approval before any such measures are taken?
In view of today's National Audit Office report that more than 16 per cent. of benefit awards contain errors, will the right hon. Gentleman find time for a debate on the staggering levels of waste that have been revealed? Such a debate would allow us to examine the full extent of the incompetence of the Benefits Agency and to raise the problems that such errors create for our constituents.

Mr. Newton: I shall take the hon. Lady's points in the order in which they were raised. I am grateful for her remarks about the police grant report. I always try to respond to representations, even though I cannot always do so. I am glad to have been able to do so on that matter.
I remain sympathetic to the idea of a debate on parliamentary procedures and I shall continue to keep the matter on what I have recently been calling my list.
I have made further inquiries about the points that the hon. Lady has raised a couple of times relating to European legislation. I am advised that the Committee reports that it is said will contain the recommendation to which the hon. Lady referred are not yet available. As soon as they are, I shall consider her request in the usual way.
On the hon. Lady's point about the White Paper, I assume that she was referring to the White Paper on the intergovernmental conference. I am not yet able to give further guidance on the timing for that.
No decision has been taken on whether an identity card should be introduced and, if so, what sort of card it should be. Specifically, none of the options in the Green Paper has been ruled either in or out. The time to consider what sort of debate might be appropriate is when we reach a decision on what might or might not be done.
I understand why the hon. Lady felt it right to raise a point about the National Audit Office report. However, the Auditor General commended
the energetic and effective steps to address fraud and error
that were being taken.

Mr. Harry Greenway: May we have an early debate next week on choice in education so that we can, in particular, consider education for 11-year-olds and examine why the Leader of the Opposition is so


obsessed with the education of a single 11-year-old and so unconcerned about the education of all the other 11-year-olds throughout the country?

Mr. Newton: I certainly cannot begin to explain that—and more to the point, it is becoming increasingly clear that the Leader of the Opposition cannot begin to explain that.

Mr. Archy Kirkwood: Having regard to the concerns throughout the UK about the privatisation of British Rail and also to the puzzling reluctance of Her Majesty's official Opposition to use one of their Supply days to debate the subject, may we have an early debate—preferably in the week beginning 5 February—to discuss that very important subject?

Mr. Newton: I take that as a plea addressed to Labour Front-Bench Members. No doubt there will be time for a Liberal Supply day, and the hon. Gentleman can perhaps consider that as a subject for the debate. I have no plans, however, for such a debate in Government time.

Mr. John Wilkinson: In view of the proposals from European Commissioner Bangemann for a European-wide defence procurement agency and a system of tariffs for the import of defence equipment from outside the EU, may we have a debate on trade and industry policy on one of the free days that remains in the week after next, so that the potential damage to national security caused if such proposals were carried through can be debated?

Mr. Newton: I draw my hon. Friend's attention to the debate that I have announced for next Thursday on the Royal Navy. He may find some way of taking part in that debate and raising the points to which he referred.

Mr. Tam Dalyell: May I ask the Leader of the House a question of which I have given his office notice? Could we have a statement next week on the validity or otherwise of a report emanating from Japan and published in Le Monde, that iodine 131, caesium 137 and strontium 90 elements have leaked in Mururoa? If the 'report is true, does not that undermine the assurance that was given by France that it was impossible for leaks to occur in material encased in rock? Does not that raise a question about the dangers arising from fissures in subterranean rocks? Will the Government consider the introduction of an international commission, as has been asked for in leading articles in Asahi Shimbun and other serious papers in Japan?

Mr. Newton: I am grateful to the hon. Gentleman who, with his usual courtesy, has given me notice of his question. I am advised that the French have assured us that the recent reports do not relate to the current test programme, and they have confirmed that the so-called revelations relate to information that has been public for some time. It remains the British Government's position that we have no reason to doubt the assurances that President Chirac has given that the tests do not put at risk the environment or public health. I remind the hon. Gentleman that the President has invited independent experts to visit the region to verify that for themselves.

Sir Peter Emery: In addition to one of the points made by the shadow Leader of the House, the

hon. Member for Dewsbury (Mrs. Taylor), may I remind my right hon. Friend and the House that the Procedure Committee has started an in-depth inquiry into secondary legislation, statutory instruments and indirect legislation coming from Europe? While a debate might well assist the Committee in carrying that work through, any views that any hon. Member wishes to express on the matter of secondary and indirect legislation would be willingly received by the Procedure Committee.

Mr. Newton: I take that as an advertisement to the House by my right hon. Friend, the Chairman of the Procedure Committee, and I am happy to endorse it. I draw the attention of my hon. Friend the Member for Northampton, North (Mr. Marlow) to my right hon. Friend's comments, as I know that my hon. Friend has a strong interest in those matters.

Mr. Dennis Skinner: The Leader of the House has tried his level best during the past few months to give the House advance information, and he has given us the dates for the Easter recess and various other dates. But somehow in the past six or nine months, he has not been able to provide us with the date of publication of the Scott report or the date for a debate on the report in the House. I am beginning to realise that he has not done that because the heads of four Cabinet Ministers are on the block. It is high time that the public out there were given a chance to see what is happening and how much fiddling has been taking place. Are the Government screwing Scott's arms up his back? Why has the report not been published, to let us get to know the truth?

Mr. Newton: There are two reasons. One is that I have not hitherto been asked—[Interruption.]—so far as I can recall. The other is that it is not for me to set the date, as the publication of the report is a matter for Sir Richard Scott.

Mr. Andrew Rowe: Given the surprising information vouchsafed to us yesterday that the hon. Member for Bolsover (Mr. Skinner) learnt more from being underground than in grammar school, could we have a debate that would allow us to discuss whether underground tests are thoroughly satisfactory?

Mr. Newton: I have no answer to that, Madam Speaker.

Mr. Gerald Bermingham: As the Leader of the House was unable to answer the question of my hon. Friend the Member for Bolsover (Mr. Skinner), perhaps he can make some inquiries, because Lord Howe seems to know the date—he was certainly attacking it in the press today, anyway. While we wait for Scott, could not the right hon. Gentleman reconsider the Ordtech appeal, which I raised with him a little while ago, and the principles involved in that case, in which innocent men stood the risk of going to prison while documents were hidden from them? Should not that be a matter for an early debate before Scott?

Mr. Newton: I certainly do not have any plans for an early debate before Scott. It would seem right that matters of that sort should await the publication of the report, on whatever date that turns out to be.

Mr. Tony Marlow: I know that my right hon. Friend is very concerned that there should


be good relationships throughout the House. I wonder whether he might feel that we should have an early debate on the subject, particularly given the bad blood that has recently developed between the Leader and the deputy Leader of the Opposition, the hon. Member for Peckham (Ms Harman) and the whole Labour party. Is he aware of an article in The Independent yesterday headed, "Tony, Gordon and no Joy", which sets out the growing chasm, I fear, between the Leader of the Opposition and the shadow Chancellor? There is an incipient tragedy of Cain and Abel proportions and perhaps my right hon. Friend can pour some oil on troubled waters in that debate.

Mr. Newton: Having seen the interesting article to which my hon. Friend refers, I would observe merely that, judging from the faces behind him during the last two sessions of Prime Minister's questions, there is a chasm between the Leader of the Opposition and almost everyone behind him.

Mr. Jim Cunningham: Bearing in mind the fact that it is just over 12 months since a serious air crash at Baginton airport in Coventry, will the Leader of the House tell us when the Government are prepared to produce proposals to deal with small airports outside London? Will he also direct his attention to the fact that the Government produced a report on the crash—when will we have a debate in the House on that?

Mr. Newton: I recall the hon. Gentleman raising related matters with me some time ago. I am sorry that I did not get back to him earlier. I dropped him a note this afternoon saying that I continue to bear his thoughts in mind, but pointing out—I hope that this will not be offensive to you, Madam Speaker—that that sounds like a good subject for a Wednesday morning debate, if the hon. Gentleman applies for one.

Mr. Nigel Evans: May I endorse the call by my hon. Friend the Member for Ealing, North (Mr. Greenway) for a debate on choice in education, perhaps with the theme, "Don't do as I do, do as I tell you"? That will give me the opportunity to mention Michael Hindley, the Labour Member of the European Parliament who lives in a neighbouring constituency to mine, who sends his child more than 10 miles to a grant-maintained selective school in my constituency. That would allow us to point out to the public that the stench of hypocrisy runs far deeper than the Opposition Benches in Westminster—to the European Parliament.

Mr. Newton: It is certainly becoming clear that, across a range of matters, Opposition policy is to say one thing, but do another.

Mr. D. N. Campbell-Savours: I met executives of Campbell Soups of Camden, New Jersey in my office this morning and they were as intransigent as ever, despite the fact that 340 Members of Parliament—the majority of the House—have asked them to keep their factory open. Can we debate those matters in Government time and will the Leader of the House further strengthen my campaign, calling on the wider public to boycott Fray Bentos products and Campbell Soups products, so that the company learns the feeling of the British people?

Mr. Newton: The hon. Gentleman knows that the policy, within the law, of commercial companies is a matter for those companies, not for the Government. I would not expect to provide Government time for such a debate. I have already suggested the possibility of a Wednesday morning debate to him. Having seen the hon. Gentleman in operation in various forums, I am glad that I was not one of the directors of the company at the meeting with him.

Mr. Richard Tracey: While my right hon. Friend is considering the request for a debate on education, will he consider broadening the debate to include the subject of grammar schools, so that the many Labour Members who went to grammar school can explain to the hon. Member for Peckham (Ms Harman) why they are against grammar schools so fiercely and so that she can explain to them why she has privately chosen one for her son? It may be because the school is in a well-run Conservative local education authority.

Mr. Newton: I am always glad to consider opportunities for the inexplicable to be explained, but I think that the debate would reveal that it remains inexplicable.

Mr. Dafydd Wigley: May I draw the attention of the Leader of the House to early-day motion 335 on home workers, which is supported by hon. Members of all parties?
[That this House recognises that many homeworkers are failing to secure protection in law to which they are at present entitled, but on which they frequently miss out because of loopholes in legislation; further recognises that the Treasury is losing hundreds of millions of pounds of national insurance contributions arising from the same loopholes; and calls on Government to allow progress on the Employment (Homeworkers) Bill.]
Is the right hon. Gentleman aware that there are 1 million home workers, the rights of many of whom, which should have been established by legislation, are not being observed because of loopholes in the law that also deny the Treasury many millions of pounds? Will he ensure that the Government take a positive attitude to the Employment (Homeworkers) Bill, which is currently before the House?

Mr. Newton: As the hon. Gentleman said, the Employment (Homeworkers) Bill is before the House. I am sure that my hon. Friends will indicate the Government's approach to the Bill if it is debated. I also understand that home workers have the same employment rights as other workers.

Mr. Iain Duncan Smith: May I draw my right hon. Friend's attention to early-day motion 295, which concerns replacement medals for war veterans?
[That this House urges the Ministry of Defence to accept the petition of Mr. Jack Conn, dated 19th December 1995, to allow him and other pensioners, who were awarded medals in recognition of service in the armed forces of Her Majesty the Queen or her predecessors and who have had these either stolen or lost through misadventure, to have them replaced, recognising the debt we owe them 50 years after the end of the Second World War.]
Could my right hon. Friend prevail upon my right hon. Friend the Secretary of State for Defence to have a debate on the matter? The 50th anniversaries of VE and VJ day took place last year and many veterans were unable to parade with their medals.

Mr. Newton: There have been many requests for replacement medals in recent years and a great deal of effort is being made to meet them. I am sure that we all want them to be met wherever possible, because we owe those people a great debt of gratitude. I shall bring to the attention of my right hon. Friend the Defence Secretary the way in which my hon. Friend raised the matter this afternoon.

Rev. Martin Smyth: The Leader of the House will remember that last week he trailed the question of my hon. Friend the Member for Upper Bann (Mr. Trimble) to the Secretary of State for Northern Ireland. Time did not allow it to be dealt with today. May I therefore press the Leader of the House for a statement next week from the Secretary of State on greater use of the Northern Ireland Grand Committee, which would create greater democracy and allow greater use of parliamentary time?

Mr. Newton: The hon. Gentleman will he aware that oral questions that are not reached are answered in writing. He may have noticed that, just before the end of Northern Ireland questions, I was looking at the file of my right hon. and learned Friend the Secretary of State for Northern Ireland which contained the answer to that question. I have an interest in the matter that was generated, in part but not wholly, by the hon. Gentleman's previous questions to me. I think that I can assure him that he will welcome the positive spirit of the answer that will be given.

Mr. Roy Thomason: Will my right hon. Friend find time to debate the millennium exhibition, so that the overwhelming advantages of Birmingham's national exhibition centre over Greenwich as a venue can be clearly put on record and the importance of the west midlands at the heart of this country can be stated?

Mr. Newton: I can safely assure my hon. Friend that even though it is not in the normal sense a Government body, the Millennium Commission is well aware of the cases being made from a number of directions.

Mr. Alex Salmond: May we have a statement from the Secretary of State for Scotland on his Department's breaches of central Government conventions on publicity and advertising? Does the Leader of the House acknowledge that we now know that last Wednesday there were at least two breaches of the conventions in two separate press statements advertising a single speech? Is not it time that the Secretary of State for Scotland came and made a statement to apologise to the House and to the people of Scotland, instead of making unfortunate civil servants apologise to him?

Mr. Newton: I have nothing to add to what I said last week. It is clear that an error was made and that the Secretary of State for Scotland had every intention of observing the guidelines and did not intend to breach them. I see no reason why he should make a statement to repeat what has already been said in other ways.

Mr. Nicholas Winterton: Will my right hon. Friend seek to arrange at an early date a general debate on crime and vandalism, and the problems that they create for the citizens of this country? Both sides of the House can then explore the exciting initiatives that the Government have taken, not least the provision of funds for closed circuit television, and also I, as the representative for Macclesfield, can support the application being made by the borough and police of Macclesfield for assistance under that scheme to install closed circuit television in Macclesfield town centre.

Mr. Newton: I must confess that my hon. Friend has caught me out as I have before me a brief on the Poynton bypass.

Mr. Winterton: Read it out.

Mr. Newton: Although I recognise that Macclesfield is some way from London, in a general sense some of the points that my hon. Friend seeks to make might be relevant to the debate on policing in London, which I have announced for Monday week.

Mr. Harry Barnes: The Leader of the House seems strangely reluctant to arrange debates about the European Union. One European item has already been discussed, but six items, some of which date back to 1994, are waiting to go into European Standing Committee A and 11 are waiting to go into European Standing Committee B. Should not the scrutiny of European matters be speeded up by holding more discussions on the Floor of the House?

Mr. Newton: I do not think that I have shown any such reluctance. I have tried to answer questions put to me as straightforwardly as I can. I shall look into the hon. Gentleman's specific point about outstanding European matters.

Mr. John Marshall: May I ask my right hon. Friend for an urgent debate on early-day motion 3?
[That this House calls on the Government to acknowledge that over 3,000 people with haemophilia have been infected with hepatitis C virus (HCV) as a result of NHS treatment with contaminated blood products; recognises that over 50 people with haemophilia are now understood to have died from liver disease contracted as a result; and considers giving similar financial assistance to those infected with HCV, who currently receive no additional help, as for those infected in the same way with HIV who have been compensated by the Government.]
Is my right hon. Friend aware that the Haemophilia Society has produced a publication that shows that haemophiliacs with hepatitis C are suffering great hardship? Is it not illogical that haemophiliacs infected with hepatitis C who have then died should have received no compensation, while those infected with HIV received compensation? The cause was the same; the consequences have been the same; the reaction has been different. Is not that unfair?

Mr. Newton: I know my hon. Friend well and I understand his reasons for raising the matter once again.


However, I am afraid that I cannot add to what I have said to him at least once before or to what has also been said to him by my right hon. and hon. Friends at the Health Department.

Mr. Paul Flynn: When will we debate the Government's undemocratic and inexplicable opposition to the call to declare St. David's day a bank holiday in Wales? Is the Leader of the House aware that last year Wales and England had fewer bank holidays than any other country in the United Kingdom or elsewhere in Europe? As all the Welsh county councils, which represent every voter in Wales, have signalled their support for that call, how dare the Government, who managed to secure only 4 per cent. of councillors in the last measure of opinion in Wales, continue their opposition to making Dydd Gikyl Dewi a bank holiday?

Mr. Newton: I was not aware that England and Wales were so deprived in that respect. It may be part of the reason why our economy is doing the best in Europe.

Mr. Jacques Arnold: My right hon. Friend will remember that on Monday we voted for an imaginative Conservative measure that provides exciting opportunities for grant-maintained schools to finance their capital projects. May we have a debate next week during which we may express great sympathy for some headmasters of grant-maintained schools, such as St. Olave's school in Orpington, about why in one week parents may gain admission for their children to their school and, in the following week, the same parents may vote against a measure to allow them to develop that school effectively?

Mr. Newton: As I have said several times this afternoon, I very much hope that it will be possible to find an opportunity for the answers to those questions to be given, but I remain very unhopeful that any answers will be forthcoming.

Mr. John McAllion: Does the Leader of the House recall the Prime Minister telling the Tory party conference that, while he lived and breathed, the NHS would never be privatised? Will he therefore arrange for the Prime Minister to attend the meeting of the Scottish Grand Committee in Stirling on Monday 29 January, so that he can attempt to explain away the fact that this week, three private consortia were short-listed for the contract to provide NHS hospital services at Stonehaven, near Aberdeen? As well as making allegations about hypocrisy, the Tory party should be prepared to answer those self-same allegations.

Mr. Newton: I do not believe that the hon. Gentleman's argument in any way fits in with the suggestion that the national health service is being privatised. The health service remains a publicly funded service, as it has been. The issue of the way in which those services are provided is, as in the case of many other services, a separate one.

Orders of the Day — Finance Bill

(Clauses Nos. 36, 105, 112 and 139 and
Schedule No. 15)

Considered in Committee [Progress, 23 January].

[MR. MICHAEL MORRISin the Chair]

Clause 139

MIS-SOLD PERSONAL PENSIONS ETC.

Question proposed, That the clause stand part of the Bill.

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The Economic Secretary to the Treasury (Mrs. Angela Knight): The purpose of the clause is to exempt from income tax and capital gains tax compensation paid in respect of certain mis-sold personal pensions, buy-out contracts and retirement annuity contracts. The exemption applies where, between 29 April 1988 and 30 June 1994 inclusive, an individual was wrongly advised to transfer from, opt out of or not to join an occupational pension scheme and instead to take out a personal pension scheme, buy-out contract or retirement annuity contract. It may be helpful if I briefly define the terms to which I have referred.
"Transfer" means the payment of a sum of money from an employer's pension scheme into a personal pension plan or a buy-out contract. "Opt-out" means someone who is a member of an employer's pension scheme and who leaves that scheme while still employed by the company, and takes out a personal pension instead. "Non-joiner" means someone who, on starting a job, decides not to join their employer's scheme even though he or she is able to do so, and takes out a personal pension scheme instead.
The problem has been identified. It became clear to regulators and to the Government that some sales of personal pensions had taken place on the basis of advice that was bad, and not given in accordance with the regulatory rules then in force.

Mr. D. N. Campbell-Savours: Early in her speech, the hon. Lady used the word "mis-sold", and she used that word rather quietly. Will she explain to us how it was that so many people managed to buy a product that was obviously not one that they should have purchased? How was it that they were mis-sold that product?

Mrs. Knight: The clause is entitled "Mis-sold personal pensions etc." Perhaps the hon. Gentleman would care to read it, because it goes into some detail—

Mr. Campbell-Savours: What about the background?

Mrs. Knight: It goes into some detail of the aspects that we propose to help in such cases.

Mr. Campbell-Savours: That is not what I asked.

Mrs. Knight: In reply to the substance of the hon. Gentleman's question, the background to the


investigation that is taking place at the moment is well documented. He will have read it in many of the reports by the various regulators who are inquiring into the matter, and I shall say more about it later. If the hon. Gentleman would care to wait a few moments and allow me to proceed, I believe that he will find that the questions he asks will be answered.
The hon. Gentleman will recall—we all recall—that my predecessor, my hon. Friend the Member for Chichester (Mr. Nelson), made a statement to the House on 25 October 1994. He announced that anyone with a personal pension who was found to face financial hardship as a result of mis-selling would be entitled to redress. The aim is to put people in a financial position equivalent to that in which they would have been if the mis-selling had not taken place. But to do that, a considerable amount of work needs to be done to identify those who have suffered loss as a result of the mis-selling and to assess how much compensation is due.

Mr. Campbell-Savours: The hon. Lady keeps using the word "mis-selling". I understand that, in so far as she is giving a taxpayer a subsidy towards redressing the difficulties that have arisen, we are in fact talking about taxpayers' money being used to deal with a problem that was generated by mis-selling. In this debate, we are surely entitled to know why it happened. Why did people find themselves in a position where they bought products that were obviously inappropriate in the circumstances? May we be given a little background information, because we are spending taxpayers' money today, are we not?

Mrs. Knight: People were given wrong advice—in most instances as a consequence of the mis-selling; people may well find that their financial position is not as beneficial as it would have been if, for example, they had stayed within the occupational pension scheme.
The proposals are designed to identify those people and, where possible, to reinstate them into the occupational pension scheme. For some individuals, such redress—entry into either the occupational pension scheme or the personal pension scheme that they took out—is not available, because they have retired. Under those circumstances, a cash payment will be made—the Government do not consider it correct to tax in those circumstances.

Mr. Campbell-Savours: Is it fair to say that there was a deficiency in the regulatory approach adopted by the Government for regulating the industry, which is why the problem occurred? Is it fair to say that we are paying today because of a lack of Government regulation in a sector where clearly there should have been regulation? Is that what the hon. Lady is saying?

Mrs. Knight: No. I am saying that some people did not pay proper attention to the regulation that was in place. Personal pensions have been sold correctly to a considerable number of people. However, it is those pensions that have not been sold correctly to some other people that we are addressing. In certain circumstances, where compensation is paid in the way that I have just explained to the hon. Gentleman, people may be liable for tax, but the Government do not consider it right to tax people in these circumstances. I hope that that is something with which the hon. Gentleman and other Labour Members will agree.

Mr. Alistair Darling: I wonder whether what the hon. Lady has just said is correct. It is common ground throughout the industry and among all the regulators that the regulations in force when the mis-selling took place were deficient. Her assertion that certain salesmen ignored regulations that were adequate is not right, unless the Government are changing their view. There used to be common ground between the hon. Lady's predecessor and myself that the regulations were deficient at the time, which is why they were subsequently changed.

Mrs. Knight: The hon. Gentleman knows full well that we have tightened up the regulations, and rightly so. He also knows full well that a considerable number of pensions have been sold, and the circumstances in which they were sold were good, and the consequences for the individuals who bought them have been good.
We are today talking about a small minority. A considerable number of people were sold pensions that were fine and a considerable number of people have made prudent provision, and will receive its benefit under the regulations that were in place at the time. One must, if necessary, tighten up the existing regulations, and we have done so. But one must also put the problem in perspective, which is what my predecessor did in his statement to the House on 25 October. The clause takes the issue forward from that statement.

Mr. Dennis Skinner: Is not the truth of the matter that the Minister is saying that the Government made a mistake, the regulations were deficient, the Government did not know, and now, today, they are putting that right? People did not make a mistake on their own account—the regulations were there and people made their investments.
Now the taxpayer is going to bail them out, and that could be called a subsidy. The Government are involved in a subsidy because of a deficiency in their regulations. I want to know how many people are involved, and how much in total the taxpayers out there in the hon. Lady's constituency and mine will have to find to foot the bill for that mistake by the Government.

Mrs. Knight: The Committee will not be surprised to learn that I do not agree with the construction that the hon. Gentleman has put on the issue. However, I am sure that he. will agree—I look forward to hearing his confirmation—that those people who are affected, who have retired and who therefore cannot be helped by the restitution to an occupational pension or a top-up to a personal pension—should be compensated, and should not have to pay tax on that compensation. I am sure that people in the hon. Gentleman's constituency who find themselves in that position will welcome the fact that the Government have decided not to tax their compensation.
I am not able now to give the hon. Member for Bolsover (Mr. Skinner) the total numbers involved, nor am I prepared to speculate. We will all have the numbers when the review is complete.
It is clear from the review so far that the majority of cases are people who either transferred out of or opted out of pensions, and that redress for those people will be achieved by restoring them to the occupational pension or by topping up their existing personal pensions. That is a different issue,


but the majority will come into that category. However, a few will have retired, so cash compensation will be the only help available to them.
If I might proceed, that would be of real help to the Committee.

Mr. Darling: May I help the hon. Lady out again? The figure that she is grasping for is 400,000.

Mrs. Knight: indicated dissent.

Mr. Darling: It is. The Personal Investment Authority, which has taken the lead in investigating the matter, believes that 400,000 pensions were wrongly sold. On that basis, surely the Government must have some estimate as to the cost of the measure.

Mrs. Knight: The hon. Gentleman should be careful about bandying numbers around. Until the review is complete, there is no way in which accurate numbers can be given. That is the reason why I do not propose to do so. No doubt the hon. Gentleman will have read press reports in which the numbers were much lower, but I cannot confirm, deny or comment on them. It would be better for the Committee to deal with the problem before us, rather than to speculate on numbers which may not be even reasonably accurate, because, until the review is complete, we will not know.

Mr. Campbell-Savours: rose—

Mr. Clive Betts: rose—

Mrs. Knight: I will give way.

The Chairman of Ways and Means (Mr. Michael Morris): Order. To which hon. Member is the hon. Lady giving way?

Mr. Betts: I think that the hon. Lady has given way to me.

The Chairman: Order. I would be grateful if the hon. Lady would indicate to which of the two hon. Members she has given way.

Mrs. Knight: I apologise, Mr. Morris. I gave way to the hon. Member for Sheffield, Attercliffe (Mr. Betts).

Mr. Betts: The Minister said that she cannot speculate about the figures. Given that the Government are talking—rightly—about compensation and tax relief on that compensation, presumably they have made contingency plans in their estimates for future expenditure and future reduction of income. Surely the Minister can explain to the House precisely how much those contingency plans will cost, as they must be based on the numbers of people involved.

Mrs. Knight: The problem relates to industry mis-selling to individuals; therefore, financial redress and the payment of compensation to individuals are matters for the industry. The Government propose not to charge

tax on compensation when it is paid in cash to individuals. We expect the number of people involved to be relatively small, but until the review has been finished, we cannot speculate on numbers.
It does not make sense to pull numbers out of a hat or to try to make estimates when we do not have the facts available. That is why the Government are waiting for the review to be completed. We are urging the regulators involved to complete the review as quickly as possible. As the hon. Member for Attercliffe will know, we had hoped that the review would be completed by now, but the principal delays have been caused by legal cases. That is unfortunate, but we must live with it. Those cases have now concluded, and the review is continuing apace.

Mr. Campbell-Savours: Will the Minister confirm that we could be talking about many millions of pounds of taxpayers' money which must be used to bail out those people who are in difficulty as a result of Government negligence in the past?

Mrs. Knight: It is not negligence, and I ask the hon. Gentleman not to use that term. The Government have not been negligent, but there has been mis-selling by the industry; that is where the responsibility lies.
The levels of compensation and the total bill will be revealed in due course, once the specifics are known. The vast majority of compensation payments will be borne by the industry. The Government will be involved in only a very small area, in the sense that tax may become an issue in a small number of cases. The clause ensures that the tax problem will not be borne by the individual concerned, but that it will be resolved by ensuring that there is no tax payable at that time. I repeat that it is one small circumstance; it is not the case with the majority of the money that will be involved in paying compensation in various forms.
I must make some progress, although I suspect that many of the points that I intended to make have been covered in the discussion. The Securities and Investments Board and self-regulatory organisation programmes—which have been worked up in order to set in train the process of determining who has and who has not been mis-sold a pension—are under way. The SIB released a detailed statement on 16 January, in which it revealed the stage that the review has reached. Those who have mis-sold personal pensions are beginning to put the matter right.
However, we should not kid ourselves: it is a mammoth exercise. Many of the large life companies have written tens, if not hundreds, of thousands of letters to their clients. Once returned, the questionnaires that they have sent must be analysed. We are now beginning to see the first fruits of the process, as payments are starting to be made. Conducting the review is a big task, but it is worth while.
It is worth it because people have the right to expect the investment advice they take to be in their best interests. When it is not and they lose, they expect that things will be put right. Personal pensions are a very good thing. They offer people flexibility in planning for the future, and it is in the interests of everyone—individuals and the industry—that confidence is restored.
Many firms have been actively engaged in taking the review forward, but the pattern is not uniform. A few of the firms concerned have not applied themselves to the task with the vigour that might be expected. Legal actions have also been brought, which have slowed the review, and, as a consequence, progress has not been as fast as we had hoped. However, those who have put obstacles in the way have only delayed the review. It is now on course, and I assure the House that it will be taken forward with vigour and will be carried through to a positive conclusion.
Let no one underestimate the task at hand, but let no one get it out of proportion. All those involved in the industry are particularly keen to identify those who have been the victims of mis-selling, and to resolve the matter satisfactorily.

Mr. Campbell-Savours: I am a little worried about some of the debts that a Labour Government—elected probably in April or May next year—will inherit. Will the Minister clarify something for me? Is it possible that a Labour Government might inherit a liability which our taxpayers will have to pay—a liability incurred as a result of negligence by the Conservative Government?

Mrs. Knight: The hon. Gentleman should not bank on there being a Labour Government next year. The biggest liability that he will inherit is the social chapter, which is proposed by his colleagues, and its consequences on unemployment in this country. On the mis-selling of pensions, the problem will be there next year, and indeed the year after, but it is a problem that is being solved well.
I now return to the clause itself, which is particularly designed to resolve the issue that we have discussed—instances in which compensation may result in tax. The Government are anxious to do all they can to speed up the compensation process. It is not just the clause that will help people. As I announced on 21 November, on advice from the Government Actuary, the Government have reduced the charges for reinstating the pension entitlement of current public service employees.

Mr. Betts: The Minister said that the Government were doing all they can to speed up the process. Perhaps she can name one or two concrete measures that the Government are taking, because many constituents feel that nothing much is happening. They were sold the wrong pensions and are not being compensated—certainly not at any discernible speed.

Mrs. Knight: Perhaps the hon. Gentleman was not listening. I have just named two measures: first, the change that will make it much easier for members of Government pension schemes to get back into pension schemes, as a consequence of the assessment from the Government Actuary; and, secondly, the clause, because it addresses the potential tax issue. These measures have received an immense welcome from the industry as being useful and good to facilitate the pension mis-selling problem.
We also endorse the SIB recommendation that redress should, if possible, take the form of reinstatement in the original occupational pension scheme. Under existing legislation, compensation for the type of mis-selling covered by the SIB review could, depending on the form in which it is paid, be liable to income tax or capital gains tax. The clause covers both eventualities.
The payment of compensation for mis-selling is still in its early stages, and we believe that it is in the interests of all concerned for there to be certainty on the tax treatment of the compensation payments. That is why we have introduced the clause. I commend it to the Committee.

Mr. Darling: I have been a Member of the House only since 1987, but I have always understood that it is one of the great traditions in Committee that the Minister says why a clause should stand part of the Bill. I found it quite astonishing that the Minister said that she had no idea how the problem arose or how many people might be involved, yet that it might be a mammoth task. She said that no one should underestimate the task involved, but went on to say that no one should overestimate it either. She could not tell us how many people would possibly be affected. She had no idea how much it will cost. She had very little to say in terms of what the Government are doing to try to resolve the problem.
As my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts) rightly suspected, the Government are not doing very much, and one reason for that is that it was they who created the climate that encouraged some unscrupulous people ruthlessly to exploit the vulnerability of many people who had recently been made redundant or were in occupational schemes, who were wrongly persuaded to come out of those schemes and to go into private pensions that were wholly inappropriate for them.
The Minister is coy, either because she genuinely has no idea why the clause has come about and she has simply been good enough to read us a Treasury brief in order to justify the clause; or possibly because she knows full well that the Government have to accept a major responsibility for creating the sort of environment in which it was possible for so many people to be sold policies in a wholly inappropriate manner.
Perhaps I should move that the clause stand part of the Bill, because I agree with its principle. We want to see people reinstated or compensated, as the case may be. Clearly it would be wrong if innocent people then found themselves subject to income tax because of the compensation or the reinstatement that they had been given by those who had wronged them. Therefore, I welcome the clause and believe that it should stand part of the Bill. But in view of the Minister's remarks, it is necessary to push her a little further.
The Opposition have raised the matter many times in the House. It remains one of the scandals of the late 1980s that up to 500,000 people were wrongly sold policies between 1988 and the early 1990s. It is easy to say that that was all the work of one or two unscrupulous or greedy salesmen, but it was not just those individuals.
Senior management knew full well, for example, that many former miners living in constituencies such as Bolsover were not only disillusioned with their employer but were persuaded that the Coal Board pension fund and the National Coal Board were one and the same thing. It was suggested to them that they might like to get out of their pension fund and go into a private pension.
The fundamental point about occupational pensions is that two people contribute to them. As a general rule, two people contributing to a pension fund is rather better than one, which is the case in a private pension. Private pensions are appropriate for many people—I had a private


pension myself in my former employment—but they are wholly inappropriate for a large number of people, and they were inappropriate for about 500,000 people who were wrongly persuaded to transfer their funds into a private pension in the late 1980s.

Mr. Skinner: My hon. Friend referred to the fact that many miners were involved at that time in what I would call the scar's of pension schemes. It was around the period when the present Prime Minister was a junior Treasury Minister. On occasions such as this, when the Government created the climate for such spivs, someone should carry the can.
That is probably one reason why the Economic Secretary is being coy about the background to the clause. She will never give us the figures. The Government gave us a figure of £21 billion for the public sector borrowing requirement, but within 12 months it had gone up to £29 billion. The Government, who created the climate in which such spivs operated, should carry the can for the resulting mess.

Mr. Darling: My hon. Friend will wait in vain. The last time we debated the matter, the Secretary of State for Social Security was present. He too knew something about it, as he was a junior Minister in the Department of Social Security when the problem first arose. Curiously, he did not want to discuss the subject. He preferred to concentrate on other matters.
All Opposition Members remember the advertisement showing a man breaking out of a straitjacket and going to get a private pension. What was so insidious about that was that it encouraged people to believe that the very act of going private was enriching, both spiritually and materially. That was not right, and many people lost money as a result.
As I understand it—the Chief Secretary may be able to obtain assistance from nearby—about 9 million pensions were sold during the period in question, about 500,000 of which may be suspect. The clause refers to the qualifying period as being between 29 April 1988 and 30 June 1994. It would be helpful if the Chief Secretary could let us know why those dates have been selected, how she can be confident that it will catch all those affected, and that there will not be people who might have been mis-sold pensions before the end of April 1988?
It is less likely that the same problem will have arisen after 1994, because—the Minister did not seem to know this—it is common ground that the regulations in force that governed the sale of pensions in the late 1980s were quite different from the regime now in force. They have been tightened up. I am surprised that the hon. Lady did not know that.
The Minister's predecessor knew his stuff. He was well briefed, and could answer such questions. We had differences of opinion about how the situation arose and what could be done to improve it, but the rules and regulations have been changed. I think that the likelihood of problems of mis-selling arising after 1994 is rather less than it was before April 1988.
People should be encouraged to use the financial services industry. More and more people will want to make provision for themselves over and above the

provision that they can expect from the state. If they are to do that, however, they will need a regulatory system in which they can have complete confidence. We have proposed measures to make the system simpler and more effective, but the Minister should realise that the root cause of the problem—the reason why the clause must stand part of the Bill—is the climate created by the Government.
4.30 pm
The self-regulatory system is now wholly discredited, and regarded as one of the main reasons for the unscrupulous behaviour that we are discussing. All the problems were produced by the Government's policy. In this as in so many other contexts, they have always been more bothered about the few who stood to gain from the selling than about the many victims who suffered at their hands. No wonder the Minister is so coy about the nature of the problem.
The need for decent advice has never been greater. We should acknowledge the importance of the work done by both the Securities and Investments Board, under Sir Andrew Large, and the Personal Investment Authority, the lead regulator. When I asked the Minister about the numbers involved and the progress being made, she said that it was all wild speculation. She must be aware—such matters are hardly secret—that I often speak to both Sir Andrew Large and Colette Bowe of the PIA, and I take the trouble to try to find out about the current position.
The Minister, however, does not seem to know that. I should have thought that, between them, those at the Treasury could rustle up a meeting or make a telephone call to find out the position. The Minister may have seen the SIB review, which has been circulated to me and, I assume, to those at the Treasury. It has thrown some light on the difficulties.
Most of the life companies—the producers—have got on with the review, and are making quite fast progress. They expect to know what the problem is by the end of the year, and have probably started to compensate some people. Those who were sold policies by the independent financial adviser sector, however, may not be in the same position.
There are two distinct difficulties. First, some independent financial advisers simply do not have the resources to carry out the sort of investigation that is now required of them. Clearly, if a small enterprise is involved, someone who is examining files relating to the past six or seven years cannot be earning, and therefore will not be generating fees and commission to pay staff. I understand that problem, but there is another.
Some of the independent financial advisers' professional indemnity insurers have tried to block the review. There are legal reasons why they might have wanted to test the matter, but their actions were wholly undesirable for the industry's reputation. The Minister mentioned delays in the courts, and they can be blamed to some extent, but much of the problem has been caused by the wilful obstruction of the review.
Another reason for the slow progress is the fact that the self-regulators cannot compel the professional indemnity insurers to get on with the review. They must rely on contracts, and if there are no contracts in the self-regulation system, they are left helpless.
That problem could be remedied. If we are not to see similar clauses in future Finance Bills, the Minister must accept that she has primary responsibility for the matter, and that the present system of self-regulation does not work. As most people outside the industry realise, it has been a complete failure. It is high time that the Government faced up to that. If they do not want a repetition of the present problem, they must accept that self-regulation is ineffective, and—what is worse—is denting the confidence of members of the public whom we want to use the industry. The industry employs 2.5 million people, and many towns and cities depend on it for employment. Self-regulation is not helping the industry, and it is not helping the public.
The Securities and Investments Board review identifies another problem. Paragraph 10 makes the point that there is
an element of self-selection amongst investors who respond.
There is every reason to believe that, either because of delay or because of lack of knowledge among those who may have been finis-sold pensions, they will not submit their claims before they are legally time-barred. What will the Government do about that? What steps will they take?
It would be most unfortunate if, at the end of this year, when the time bar will start to bite, people have been excluded over and above those who are excluded by the clause because it affects only policies sold after the end of April 1988. Some people, however, may find that they are time-barred, and the clause cannot help them at all.
The Minister must tell us what she will do about that. She was keen to tell my hon. Friend the Member for Attercliffe that the Government were doing lots of helpful things, and that he had no cause to worry. That is one thing that the Government will have to deal with. Clearly, to amend the general law relating to prescriptions would be to take a sledgehammer to the problem—that is not appropriate—but I am just wondering whether the Government could do something in this case.
Perhaps by the time my hon. Friends have finished speaking in the debate, the Minister will have enlisted some help and be able to assist us on that important point.

Mr. Denis MacShane: Is my hon. Friend aware that the Government spent about £10 billion on advertising to encourage people to withdraw from the state earnings-related pension scheme and to go into personal pension schemes? Some tiny proportion of that money might be usefully spent in the form of newspaper advertisements, first, to apologise for the negligence caused—if the Government are capable of saying sorry—and, secondly, to draw the attention of everyone concerned to the need to apply now to ensure that their claims in terms of tax relief and other applications are not made too late, and do not fall out of compliance with the final date.

Mr. Darling: My hon. Friend is on to an interesting point. He is right to say that about £10 billion was spent on advertising. It is interesting that the advertising not only encouraged people to go into private pensions, but, surprisingly, invited those seeing or reading it to believe that it all had something to do with the Conservative party. Curiously, it does not want to have any more advertisements.
My hon. Friend makes an important point, although I might differ from him in one respect. He suggests that the Government should place advertisements saying that they are sorry. I can see a compelling reason for the Conservative party placing advertisements saying that it was sorry about that. It could take a double-page spread and add a few other things besides, but, as the Government never tire of telling us—and I agree—the Government do not have any money of their own: it is taxpayers' money.
The difficulty here is not only that the taxpayer paid for the advertisements to encourage people to get into the difficulty, but that they have to pick up the pieces at the other end. The people who buy policies are having to pick up the pieces because of the compensation and all the other costs. There has been cost after cost after cost—all imposed because the Government tried to sell their dogma, and, as I said, acted in the interests of the few, as a result of which many people have suffered.
The Government have rightly tabled this clause to deal with the people who opted out of occupational pensions, but we have not begun to consider in great detail another category of people: those who were wrongly persuaded to opt out of SERPS. No one knows—I am prepared to concede on this point that I do not know either—how many people might have opted out of SERPS. I fear that many people may wrongly have been persuaded to opt out of it.
My question is simple: what will the Government do about that? Will there be a similar clause in next year's Finance Bill to deal with that problem? Perhaps, as the Minister will be dealing with that point, she will also tell us what the Government are doing about it and what inquiries they have put in hand. I know that the regulators have taken the view that they have to solve the problems in relation to occupational pensions first, and then turn to the SERPS problem.
What we have here is a cleaning-up exercise. We are cleaning up after a mess that was caused, to a large extent, by the actions of the Conservative Government in the late 1980s, and in respect of which they will not accept responsibility. Yes, there were others who were culpable. Many of them have left the industry. Others have been fined and punished. We will support the clause because we want to ensure that the people who lost money through no fault of their own are restored to the position they were in before this disaster struck them—so far as that is possible. That is only right.
The Government should do two things. First, they should accept responsibility for what they have done—something this Government have been very poor at doing. Secondly, they should take action to ensure that such a disaster does not happen again, which means—I state it once again—that they have will have to do something to simplify the regulatory system and to make it more effective. The Government will also have to investigate other spheres—such as SERPS—in which, I fear, there may be another problem that will force us to return to this matter next year.

Mr. Betts: As my hon. Friend the Member for Edinburgh, Central (Mr. Darling) just said, Labour Members welcome the clause, although we do not welcome its background or the reasons that have made it necessary. It is incredible that we have a major national


scandal that is not merely a general problem but a problem for all those individuals who have suffered a great deal. They initially suffered a potential loss of their pensions, but, even now that they recognise that there may be some light at the end of a long tunnel and that the problem may eventually be sorted out with a bit of further relief provided by the clause, they have still undergone the agony of uncertainty, and the matter has still not been finalised. That lack of progress concerns Labour Members, and it is a pity that the Minister did not show the same concern when she spoke to the clause.
It is incredible that the Government blame the private sector and unscrupulous private individuals for creating the problem, while, at the same time, taking no responsibility at all for their legislation, which allowed private individuals to behave in such a manner. That is the reality. Why will the Minister not admit that and say, "The Government got it wrong. Yes, we were responsible for bad legislation and we apologise for the heartache and problems that we have created"? The legislation was wrong and, as my hon. Friend the Member for Edinburgh, Central has pointed out, the regulatory regime was totally inadequate because it was self-regulatory.
Self-regulation was of course a product of the deregulation mania of the 1980s and the Government's attempt to create the spectre of the nanny state—from which they were saving people. Whenever problems about the recession are mentioned, Conservative Members happily get to their feet and say, "It was not our fault, not as individuals. It was all the fault of Lord Lawson, in his role as Chancellor of the Exchequer. He created the boom, and he was responsible for the recession." Why do not they do the same thing with this issue? They could speak to this clause and say, "We have reached the position where we have to introduce this clause, but the problems are from way back in the 1980s. Lord Lawson, who was then the Chancellor of the Exchequer, was to blame for the scenario and for all the problems that have occurred, but we have since moved on."
Conservative Members cannot do that, however, because so many Government Members are completely and utterly tied up in this mess. When those measures were introduced, the right hon. Member for Sutton Coldfield (Sir N. Fowler), advocated the proposals and launched the advertising campaign, about which we have already heard, to persuade people to take up personal pensions. We all know that his assistant and junior social security Minister at that time was the Prime Minister.
The Prime Minister had the hands-on responsibility for creating this disaster, and it took him a long time to do it. In 1990, when the Prime Minister was the Chancellor of the Exchequer, he told the House during the Budget statement:
This extension of choice is a considerable tribute to my right hon. Friend the Member for Sutton Coldfield (Sir N. Fowler). Over 3.5 million people have now taken out personal pensions. As well as benefiting the individuals concerned, in the long term this will reduce public spending".—[Official Report, 20 March 1990; Vol. 169, c. 1017.]
That statement is a sick joke. That was the Chancellor of the Exchequer, now the Prime Minister, telling the House in 1990 that personal pensions were a great bonus for all those people who had taken them out. He had not a shadow of a doubt that it may have gone wrong.

He spoke about a reduction in public spending, when we now know from this clause that there will be a cost, not only from the initial advertising campaign but to rectify the problems that the campaign created. It is time for the Government to admit that they and the private sector are responsible for those problems.
The Economic Secretary to the Treasury will not come clean and spell out the precise scale of the problem. My hon. Friend the Member for Edinburgh, Central has said that the PIA has estimated that 400,000 pensions have been wrongly sold in some manner. At the beginning of the investigation the Securities and Investments Board discovered that there was substantial compliance with the main conduct of business rules in only 9 per cent. of the files examined, based on the initial pensions transfer pilot studies. That does not mean that 91 per cent. were completely mis-sold, but that 91 per cent. were not conducted in a totally proper way. That is an enormous scandal because that was how things worked within the self-regulatory climate that the Government proposed.
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The Economic Secretary to the Treasury said that the Government still cannot discover, after all this time, how many people are involved, how many pensions were sold or how much it will cost in total in compensation. If the Government do not know, how do journalists manage to obtain figures? The Financial Times, on 17 January, was able to obtain such figures. Pension companies give journalists estimates of the compensation levels that they expect to pay out. Journalists can apparently pick up a telephone and obtain figures from Allied Dunbar of £100 million; Lloyds Abbey Life, £80 million; and Barclays Life, nearly £50 million. They can get figures from a substantial number of the pension companies. Some of the pension funds would not respond to the questions, but presumably they would have responded had the Government bothered to find out for themselves the scale of the problem. Instead, they sit back and say that they do not know and are not interested in discovering what has happened.
On 20 January, Weekend Money, a supplement of The Times, contained estimates and figures from Pearl Insurance, which admitted that it thought there would be about 40,000 opt-out cases. It said that it had sent out 300,000 letters. Companies have that information and are making their estimates. Why cannot the Government collect that information and come to an overview of the problem? The Minister has denied being able to do that.
In the end, as my hon. Friend the Member for Edinburgh, Central said, it is down to ensuring that the scandal does not happen again. Surely that would be simple to do. When we are examining a regulation, we must think of its purpose. First, regulation is meant to stop problems occurring and to ensure that things are done properly. On that first test, the self-regulation of the selling of personal pensions that the Government had in place has been an absolute failure. It is time for the Government to accept that and put in place statutory regulations.
The Government do not want to do that and choose to ignore the problem. In this case, however, they must admit that this is not a theoretical argument but a clear case with evidence that self-regulation has been an absolute failure. Secondly, presumably, recognising that


whatever system of regulation one has in place things will go wrong and some people will not abide by the regulations, the purpose of regulations and a regulatory system is to be able to identify when the things go wrong. In this case, it was not the SIB or the self-regulatory organisations that discovered the problem. The SRAs were oblivious to the problem even though in 91 per cent. of cases people were not being advised properly and in 400,000 cases pensions were mis-sold. That is a scandal. So the second function of regulations failed. The Government have to accept the need for change.
The third reason for regulations is to ensure that, having identified a problem, there is a speedy resolution. No one would accept that the current regulatory system provides for a speedy resolution. Certain pension companies have said that they could not send out the letters and questionnaires quickly enough because they did not get advice from the SIB quickly enough.
I do not really want to go over the details of a financial scandal for which the Government were responsible. I am making a serious request that the Government accept that the regulatory regime failed on three counts: first, it did not stop the problem happening; secondly, it did not identify it when it had happened—indeed, it seemed oblivious to the problem; and, thirdly, it did not correct the problem speedily. Is not it time that the Government accepted that they got it wrong and joined us to find a proper statutory system of regulation that will stop such scandals occurring again?

Mr. MacShane: I have listened to the debate with some interest. I am waiting for the word "sorry" to pass the Minister's lips. After all, she is proposing to put aside an immense amount of new money—money that would otherwise be in the public coffers—to rectify the mistakes of her predecessors. We do not blame the hon. Lady because she was not in the House when the scheme was introduced. She has to come here with a giant dustpan and brush. In Paris and Orlando, the younger and more dynamic members of the Disneyworld team, wearing bright blue uniforms, walk behind the elephants with giant dustpans and brushes, trying to clear up the mess. The Minister is clearing up the droppings from the elephantine figure of Lord Lawson, so perhaps she feels she does not have to say "sorry".
The scandal has affected many of our constituents. The Government say that no figures are available, but last year Hansard reported a figure of 500,000 and the Personal Investment Authority has cited a figure of 400,000. A large amount of public money is involved and it is irresponsible of the Government not to tell the House the precise sum.
Pension companies have accepted responsibility for the mistakes. Norwich Union, Legal and General and Barclays have fired people and shaken up their systems. We may all feel that it is a little late for that, but at least they have accepted a direct responsibility and have dismissed their incompetent staff. I invite the Minister to accept some retrospective responsibility. It would not hurt her career if the word "sorry" passed her lips.
This is one of the great scandals of the last decade. As long ago as 1991—before the Minister came to the House, so it is not her direct responsibility—the SIB published a report showing that one third of all personal pensions taken out were terminated within two years. Either an

awful lot of pensions were sold to 58 or 63-year-olds or it was one of the biggest financial scandals of the century. The SIB reported losses to individuals running at £250 million a year, mainly from up-front commission charges and the front-loading of monthly premiums. The money disappeared into the pockets of people whom the pension companies later had to dismiss. That is a Maxwell every year, inflicted by this Conservative Government on those who were conned into taking out personal pensions. It is all part of the wider question of how the Government relate to citizens on the question of pensions.
I welcome the forceful speech of my hon. Friend the Member for Sheffield, Attercliffe (Mr. Betts). He correctly identified the need for regulation. To place an adjective before "regulation"—for example, self, state, independent, autonomous or agency—would be a misnomer. We are talking about people's investments to provide for their old age, so the principle of caveat emptor is not good enough. We need a flexible and friendly system; it must not be onerous or devised exclusively by civil servants. We need to move away from caveat emptor and allow people to have a direct stake in their pension schemes, in the knowledge that that stake will be safe from corruption.
I feel affection and respect for the Minister. She was the minder for my opponent in the by-election that I won—and she minded him to losing his deposit with considerable charm. However, I would rather take advice from Cilla Black on a blind date than from the hon. Lady on any aspect of pension provision. I chide my children every day to teach them the magic puissance and power of the word "sorry". I use a French word because my hon. Friend the Member for Bolsover (Mr. Skinner) ranted at me yesterday in Latin.
I hope that the Minister learns to allow the magic word "sorry" to pass her lips. Many of her hon. Friends have condemned the feckless, profligate, spiv regime of the former editor of The Spectator, who was Chancellor of the Exchequer during a sad period for this country. It has done no harm to their careers. The Minister should feel able to rise and say "sorry" to those who were misled. She must not praise but bury the era of Lord Lawson. The House would welcome that and those who were misled into taking out personal pensions would feel that they had a friend in the Treasury.

Mrs. Angela Knight: The hon. Member for Rotherham (Mr. MacShane)—better known as the hon. Member for Geneva—is, as always, extremely entertaining. This is an important matter and I am glad that hon. Members are treating it seriously.
I am aware that it is part of Labour party policy to impose wholesale change on the financial regulatory system, but it is not something with which I agree or with which most of the industry agrees. It is important that we deal with the issues of today. If the hon. Member for Edinburgh, Central (Mr. Darling) talks to the industry with an open mind, rather than having already made up his mind on his policy, he will also hear that the industry does not want wholesale change of the financial regulatory system. The industry is looking for stability.

Mr. Darling: The Minister is right that the industry does not want wholesale change—nobody is suggesting that—but it does want significant changes in the various


areas that I have identified. If she stays in her job for much longer and takes the trouble to speak to people, the Minister will find a growing consensus as to what form that change might take, and Labour is articulating that.

Mrs. Knight: I am sorry to disappoint the hon. Gentleman, but I have found that there is considerable concern within the financial services industry at the hon. Gentleman's proposals, which are considered to be a wholesale change.
A number of important points have been made in the debate, and I propose to reply to them. On the numbers involved, there are about 9 million personal pensions overall. Some 2 million of these relate to transfers and opt-outs, of which possibly 400,000 are in the criteria of "those to be looked at". There will be no knowing how many of those 400,000 have been mis-sold until the review is complete. I say yet again to Opposition Members that we do not know the specific figures—all we know is that people are covered by certain criteria. That does not mean that they have been mis-sold a pension.
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The date that pertains to the clause and to the review as a start point is 29 April 1988, which is when the Financial Services Act was introduced. The hon. Member for Bolsover (Mr. Skinner) made a point regarding mine workers. I can tell him that the mine workers' pension scheme is allowing victims of mis-selling to be reinstated, and miners will be put back to the financial position they would have been in had mis-selling not occurred. A number of former members of the scheme have already been reinstated. I hope that the hon. Gentleman finds at least some comfort in that fact.
The situation regarding the IFAs—the independent financial advisers—is more complicated than we have perhaps seen with life offices. The reason for that, as the hon. Member for Edinburgh, Central (Mr. Darling) outlined, is that there have been court cases relating to questions on professional indemnity insurance. Where the PIA wanted one thing and the professional indemnity insurers wanted another, the IFAs felt that they were unable to proceed with the review. That matter has now been resolved, and I welcome the agreement between the PIA and the professional indemnity insurers to enable progress to be made, as the review of personal pension transfers and opt-outs involving IFAs can now be taken forward.
The agreement clears the way for IFAs to complete a review of their casebooks and to provide redress where it is due. There is concern about the ability of small IFAs to carry out the review as it is required. Large product providers have paid for the development of computer software to enable IFAs to carry out the detailed calculations required in the review. This will be of considerable benefit to IFAs and has the added benefit of helping to ensure that the calculations are correct and compliant.
The hon. Member for Sheffield, Attercliffe (Mr. Betts) mentioned an advertising campaign. Wide coverage has been given to the Securities and Investments Board's progress reports, and similar wide coverage has been given to the matter since it started. A large amount of

coverage has been given to the reviews, the progress report and the issue as a whole in the past few days. In addition, the SIB has made widely available detailed fact-sheets on the review, the PIA has set up a dedicated pensions unit and a helpline and a large number of questionnaires have been sent out. Therefore, we do not think that an advertising campaign going any further than the publicity that is currently taking place is required.
Questions have been asked about SERPS. As promised at the time of the October 1994 statement, the SIB has been working with the Department of Social Security and consultants to establish whether there has been a significant degree of mis-selling of personal pensions to people who otherwise would have remained in SERPS. Again, this is a complex task that requires a detailed analysis of a specially determined sample of a DSS database. It has taken longer than initially expected, but I am glad to say that the SIB should be in a position to make a statement within the next couple of months.
I must ask the hon. Member for Edinburgh, Central to wait for the SIB's statement to see the full results, but I can say with some confidence that the scale of the problem—if there is one—is a great deal less serious than in the area of transfers and opt-out cases. We will consider with the SIB what needs to be done once the findings of the review are known.
The point was raised about the cost of the tax exemption proposed by the clause. The "Financial Statement and Budget Report" published on Budget day suggested that this measure will have a "negligible effect" on revenue. The Committee will be aware that the continuing uncertainty about the price or the approximate number of cases of mis-selling mean that we are not able to provide precise figures. At a time when compensation payments are only just beginning to be made, it is not possible to give a more accurate estimate of numbers than that which I have given.
I conclude by referring to an article in the Evening Standard, which stated that there are two morals to he learned from mis-selling. The first was that if a person was sold a personal pension and had the slightest suspicion that mis-selling had occurred, he should start kicking up a fuss. The second moral was that anyone mis-sold a pension should not let that put them off purchasing a personal pension. These are points with which I, and I am sure most hon. Members, entirely agree. I hope that the Committee will agree with and commend the clause.

Question put and agreed to.

Clause 139 ordered to stand part of the Bill.

Clause 112

RETURNS AND SELF ASSESSMENT

Mr. Mike O'Brien: I beg to move amendment No. 9, in page 76, line 37, at end add
'(9) In subsection (2) of section 199 of the Finance Act 1994, for "1996–97" there shall be substituted "1997–98".
(10) In subsection (3) of section 199 of the Finance Act 1994, for "1996" there shall be substituted "1997".'.

The Chairman: With this we may discuss the following amendments: No. 10, in page 76, line 37, at end add—
'(9) After subsection (2) of section 178 of the Finance Act 1994, there shall be inserted the followig subsections—
(3) For the year of assessment 1996–97, for the words `31st January' in his section there shall he substituted the words `30th April'; and
(4) For the year of assessment 1996–97, for the words `31st October' in this section there shall be substituted the words '31st January'.".'.
No. 11, in page 76, line 37, at end add—
'(9) After section 194(1) of the Finance Act 1994, there shall be inserted the following subsection—
(2) For the year of assessment 1996–97, for the words `5 per cent.' in this section there shall be substituted the words `2.5 per cent.'.".'.

Mr. O'Brien: Self-assessment has been described by the leading tax advisers Ernst and Young as
the biggest change there has ever been to the tax system of this country since the introduction of Income Tax in 1803".
The firm adds that, by comparison, the introduction of PAYE in 1945 was
simply tinkering around the edges".
Let us be clear about it—Labour supports the concept of self-assessment. We want it to succeed, but we believe that it is being rushed in at an alarming pace. The Government appear to be more interested in cutting 3,000 Inland Revenue jobs to make short-term savings than in getting it right. The result will be a confused botch-up of an introduction that will cause unnecessary burdens on business and 9 million self-employed people and will undermine confidence in the whole concept of self-assessment. It is all so unnecessary, and it need not happen. If the amendment is accepted, we can phase in self-assessment in a balanced and measured way and help business to create confidence in the whole idea.
There is much in the Government's attitude that reminds me of the introduction of the Child Support Agency. A good idea in principle is rushed through because it might provide an added cost saving bonus, but goes horribly wrong in implementation. I predict that self-assessment will be a policy debacle for the Tories on the scale of the CSA. Today, we are merely serving warning that the buff envelopes containing the self-assessment forms that thud through the letter boxes of Conservative Members' constituents will have just same the effect as the CSA assessment forms that have arrived to the anger of fathers and voters in the constituencies of Conservative Members in recent years. Self-employed business people will come along to complain to Tory Members. It will happen just before the general election and it will lose the Tories votes. It will create anger and contempt at their policies. All we aim to do through the amendment—in a spirit of charity—is to save them from themselves.

Mr. Nigel Forman: The nub of the hon. Gentleman's policy on the matter and, indeed, that of his hon. Friend the Member for Oxford, East (Mr. Smith), who spoke on the subject on Second Reading, seems to be phasing in. That implies either that everyone moves towards self-assessment more slowly, or that some groups are moved towards it by law more quickly than others. Which is it and can he explain more?

Mr. O'Brien: We want to ensure that the procedures are in place to enable the successful introduction of

self-assessment. We want to ensure that the computer and electronic lodgement systems and the machinery of how the system will work are properly organised. There are some question marks over that. There is also the question of training Inland Revenue staff.
All those problems must be resolved and we are concerned that the system will be rushed in and that Conservative Members will pay the price. After all, Labour Members of Parliament will have an excuse. We can say that we voted for the amendment to enable the system to be introduced properly. Today, Tory Members are offered their opportunity of an alibi to protect them against the bungling of their Treasury Ministers. They should vote for the amendment. Self-assessment will still happen, but it can be done properly. That is our offer to the House and that is why we are telling Conservative Members to vote for the amendment and delay self-assessment, or at least to support the other amendments so that we can deal with some of the more difficult issues that self-assessment raises.

Mr. Forman: Is the hon. Gentleman aware that the date on which people must start to fill in the forms on the new basis has already been delayed by one year? What is the argument for delaying it further?

Mr. O'Brien: I am about to set that out in more detail and if the hon. Gentleman—an old colleague from the Select Committee on Treasury and Civil Service—pays attention, he will learn that there are many reasons why the delay should be accepted. I invite him to conduct a survey among some of the companies in his constituency, as I did in mine recently. I asked them what they knew about self-assessment and whether they were happy with it.
Some were very happy, particularly the bigger companies with accountants who had been following the matter closely, but others were less sure. A leading company in Bayton road, Bedworth said that it felt, "badly informed" and did not yet understand what it might do, saying:
There is a lack of clarity. Until more information is available we do not feel prepared".
That company sought a more simple, straightforward explanation of the system.
A major manufacturer in Bedworth said, through its accounts clerk, that the introduction seemed rushed and sudden, which is not an uncommon response judging by the survey conducted by my office.
A wages clerk working for a business in Hartshill, who had an information pack, said:
There was an awful lot of literature.
She had had no time to look at it yet in detail but felt that it looked "very complicated". She also felt that there was "insufficient advice".

Mr. Tim Smith: I wonder what leads the hon. Gentleman to suppose that, if we delayed self-assessment for another year, people in business who are very busy trying to run their businesses would attend to the matter in the next 12 months. Inevitably, there will be people who, however much information the Revenue puts out—it has put out some good, simple information,


including audio tapes on the subject—will not attend to it until the time comes. So, we would just be putting the problem back a year.

Mr. O'Brien: We would also be giving those businesses more time to understand what is happening. That extra time is extremely important. As I said, this is a major change to our tax system. I do not think that Conservative Members have comprehended the enormity of what is proposed. We should do it, but we should do it properly. Conservative Members are not yet sure how they will carry it out. They will create a series of difficulties for themselves, which need not be created, and will undermine the project in the process—a project that we all want to succeed in the longer term.
I also spoke to a small manufacturing and hire company in Coleshill, which said that it knew nothing about self-assessment but hoped that its accountant did. Another Coleshill business said that it knew it was coming, but knew little else about it and complained of "insufficient information". A day had been arranged for companies to be advised on self-assessment, but there was too much to do to take the day off to attend.
A self-employed man who runs a business called Sign Language said:
I do not have any opinion on SA because I have never heard of it.
The managing director of a large manufacturing firm, who had a finance background, did not think that self-assessment would present any serious problems for him, but was concerned that some of the information that he had received needed to be much better and that a tape on the subject failed to say anything of substance.
5.15 pm
Those are the typical responses of small and medium-sized businesses on the subject. Conservative Members should talk to people in their areas and find out the response. Recently, I spoke to a meeting of small business men and women in Coventry, who expressed "trepidation" at the proposed changes.
It is not surprising that there is some concern among small businesses. They are right to be concerned. Hurried attempts at Government cost-cutting now are likely to cost small businesses and the self-employed dearly. Many will have to employ accountants to understand the forms and the complexities of the legislation.
Let us look at the Bill and the schedules to it. Just look at schedules 18 to 25, which I have here. They contain detailed and complex clauses and information, which will have to be understood and digested. They go on and on-54 pages of rules in close type.

Mr. Malcolm Bruce: The hon. Gentleman is making a detailed and cogent point on the problems of both businesses and individuals. Given the fundamental scale of the change and the substantial reductions in staff, how does he think the Treasury and the Inland Revenue will cope? Has he done any surveys of internal morale and mood within the latter organisation and of its ability to handle all the queries?

Mr. O'Brien: That is a good point. It would appear from the Inland Revenue staff association that there are

problems of morale. There will be staff reductions-3,000 are to go as a result. It is my view that morale will be undermined because of those reductions at the very time that considerably greater demands will be placed on staff—while self-assessment is phased in. The staff simply will not be there to cope with the demand. So, the hon. Gentleman has a good point and it is not one that the Government have yet understood. They are so desperate to find money for tax cuts to win them the election that they do not understand the difficulties that they are creating for themselves.
How can one expect a self-employed person to be sure that he is obeying the law? Let us remember all the penalties that the new legislation will create. Following enactment of the Bill, self-assessment provisions will be found in the Taxes Management Act 1970, as amended by the Finance Act 1994, the Finance Act 1995, and now the Finance Bill in 1996. Those include amendments to amendments.
If I were self-employed and wanted to understand the law, I would need to read the 1970 Act, as amended by the 1994 Act, the 1995 Act and this Bill and I would have to understand which amendment applied to which amendment.
I shall give an example. If one wants to understand the complexities of self-assessment, one should look at clause 112, which is the first clause on the subject and amends section 8 of the 1970 Act, which was originally amended in the 1994 Act—that amendment was flawed, so section 8 was amended again in the 1995 Act. Does it really inspire confidence that the clause must be amended again in the Bill? This is the Government's second attempt to correct the clause.
I have glanced through the new section, as amended by the 1994 and 1995 Acts and the Bill. I must inform the Minister that the version that he is presenting to the House in clause 112, which amends section 8A(1) of the 1970 Act—on trustee's return—contains an obvious and stupid grammatical error. Line 4 refers to
the amount payable by him",
when it should read, "payable by them" or
payable by any one of them".
That is a small grammatical error. I make no more of it than that except to say that we are dealing with an amendment of an amendment of an amendment. That suggests a rushed, even slipshod approach. It is messy and it worries me that the Minister is cooking up a dog's dinner for business and the self-employed.

Mr. Denis MacShane (Rotherham): On Government grammar, my hon. Friend may recall that in Prime Minister's Question Time earlier this afternoon, the Prime Minister said, in answer to a question about the CBI—

The Chairman: Order. The hon. Gentleman is trying hard but he is not in order.

Mr. O'Brien: The Bill is a bit complex, even for a lawyer like me. There needs to be a Consolidation Act to deal with the whole subject of legislation for self-assessment. There needs to be easy access to the legislation for those who will have to deal with it. A year's delay would enable the Treasury to bring forward a Consolidation Act that would bring all the legislation into clear sequence.
The Government are pushing self-assessment through even though they know that tax legislation across the board is getting much more complex each year. The hon. Member for Beaconsfield (Mr. Smith) knows that because he has advocated simplification. Let us allow time for it. We are talking about a significant cultural change for the taxpayer. The Government acknowledge that. We need to ensure that that change can occur and that sufficient time is given for it to occur.

Mr. Gerald Bermingham: I have listened carefully to what has been said. I shall declare an interest later. Does it occur to my hon. Friend, as well as to Conservative Members, that the more complicated that we make the legislation and the more difficult it will be to make self-assessments, the more people will be disinclined to self-employment? Jobs will be lost and wealth creation will suffer.

Mr. O'Brien: I hope that my hon. Friend is wrong but if things happen the way that we fear they will, what he fears may come to pass. That would be regrettable.
The Federation of Small Businesses is deeply concerned about self-assessment, as well it might be, and is asking for it to be postponed. I have also received a pertinent letter from the British Retail Consortium. It states:
Dear Mr. O'Brien… As you will know, Self Assessment is programmed to come into effect in April this year, subject to passing of the relevant provisions in the Finance Bill. In view of your interest in this subject, we wish to apprise you of the following:—

(i) the feedback from our members, as a substantial body of employers who employ 2.1 million people, is that the. Inland Revenue are not geared up to administering the new regime;
(ii) considerable problems, such as uncertainties of interpretation, will arise from administering this radical new regime;
(iii) the Revenue have not e.g. provided adequate relevant material for employers to brief employees;
(iv) employees will be bound to look at their employers for help with self-assessment and it is unfair for employers to be put in the position of unofficial and unpaid tax advisers;
(v) retailers, therefore, are urging the Inland Revenue to give urgent and fresh consideration to finding means to alleviate problems from self-assessment, whether by delaying implementation until 1997/98 or by some other means."

And so say all of us.
Tory Members should listen to the employers, heed the warnings and step back from the brink of political self-destruction. The self-employed and those who run small businesses have had a rough time of it already. Let me make new Labour's plea not to impose new burdens upon their shoulders. They have made the courageous decision to start an enterprise and create wealth for them selves and for Britain. They may have a bank or investors on their heels, hounding them for results. They have had to face a recession, late payments or, even worse, non-payment. The words "cash flow problems" are ones with which they are no doubt familiar.
I was self-employed for several years before I came to the House. People who have run their own businesses know what a chore it is to maintain accounts. Do not place upon such people the burden of the rushed and confused introduction of self-assessment. They are ill-informed about such a tax regime. Many of them are unprepared for it and it may impose penalties of which they are ignorant.
The legislation must be simplified to make self-assessment work. Simplification reduces complexity, cuts compliance costs and makes self-assessment possible, but it takes time. Our amendment would give the Government that time.

Mr. Tim Smith: Does the hon. Gentleman agree with the proposition in the letter that he read out that no obligation should be placed on employers to provide information to their employees to help them with self-assessment? He said, "And so say all of us," at the end of his quotation.

Mr. O'Brien: We want to make sure that whatever system is decided upon works. We want the time to consider such issues. When I said, "And so say all of us", I was particularly referring to the final part of the letter. Employers are telling Conservative Members that they are going to have difficulties with the system. Give them the time to sort those difficulties out. That is all that we are asking and what Conservative Members are denying them.
To make self-assessment succeed—and I have said that we want it to—we need to create confidence in the system. We do not want headlines in The Sun about how the newspaper has uncovered someone who has said on a self-assessment form that he was liable for only a small amount of tax but who has not declared all sorts of things, only for it to turn out later that he had not understood the forms. That would bring the whole system into disrepute and undermine confidence. It is right that the Government should introduce the process cautiously.
We are right to be concerned about the risk factor. Only about one third of returns will be considered for inquiry, of which around two thirds will have some inquiry made about them. Only a small percentage will be given a full investigation. It is essential that the selection process is got right from the beginning. Rushing through the process will make it more likely that some fraud will get through. Once some people get the message that fraud can escape detection, confidence in the system will be undermined.
It is also necessary to be able to distinguish mistakes by taxpayers from fraud. That requires care, experienced staff and the setting of precedents about what will be regarded as fraud. In the big bang approach to self-assessment advocated by the Government, problems will be exacerbated and there will be greater potential for the self-assessment system to fail.
The Federation of Small Businesses says that 1.5 million self-employed people do not have an accountant. With this complex legislation, they may need to employ an accountant or tax adviser. The Government claim that that will not happen. As always, there are those who disagree.
In June, both the Chartered Institute of Taxation and the Institute of Chartered Accountants urged taxpayers to get help and advice from an accountant. Many accountancy firms, such as Cooper Lancaster Brewers, are hoping to cash in on the fears of the self-employed by offering special packages to deal with self-assessment. Some US firms, such as Hon. and R. Block, are keen to establish themselves on British high streets. They think that there will be greater demand for accountancy and advice after the introduction of self-assessment.
The annual fees paid to an accountant can often be offset against tax as part of a business's running costs. It may be that it will not be only the self-employed who line


the pockets of accountants and advisers; money that the Revenue would otherwise have received will go to them. I am certain that the Government do not intend that self-assessment should provide a boom for accountants. I want to be sure that it does not.
Labour is not only concerned about the cost of compliance but at the growth of unqualified tax advisers. The Inland Revenue Staff Federation and Tax Aid have pointed out the need for regulation of such advisers. If self-assessment causes some people to go to unqualified tax advisers like Harry down the road to do their returns, they could incur penalties for delays or inaccuracies caused by Harry not being properly qualified. Those legitimate issues should not preclude self-assessment but urge caution in its implementation.
Penalties are an important concern.

Mr. Bermingham: Will not my hon. Friend's argument also apply to the elderly widow or pensioner with a few shares in the business that her husband once worked for and who does not know where she has put the dividend slip and cannot justify tax deducted for the dividend? She will have to scrabble round her house. Is she going to be penalised for a mistake over a few pounds? It appears so from the legislation.

Mr. O'Brien: That is worrying and makes the point that we need to ensure that self-assessment is phased in cautiously and carefully. Phased in it must be, but in the right way.
If taxpayers fail to file their forms by 1 January, they will incur a fine of £100 and a 5 per cent. surcharge on any tax after that which is due. Small businesses and the self-employed, overworked and perhaps understaffed may miss deadlines because they do not realise what the law is.
The Federation of Small Businesses has proposed that, even if the Minister will not delay the project by a year, the penalties should at least be adjusted and people should be given a warning note after 1 January 1998 saying that they may be fined the following year. If the Minister does not accept that there should be a one-year delay, he should reduce the impact of the interest for late payment for a period of time. Our other amendment is important because it deals with that issue and proposes that the 5 per cent. interest penalty be halved for one year.

The Financial Secretary to the Treasury (Mr. Michael Jack): So that I may follow the hon. Gentleman's argument, will he tell me at which point in the tax payment cycle the penalty to which he refers is payable?

Mr. O'Brien: The penalty is payable just after the money is due. Interest starts to arise at that point.

Mr. Jack: Are we discussing payments on account or the final payment of a tax year's total requirement to be paid to the Revenue?

Mr. O'Brien: The latter.

Mr. Andrew Smith: Did not the Minister know that?

Mr. O'Brien: He did not appear to know. So long as he is now clear on the facts, we can proceed.
Ernst and Young also say, first, that it is not clear what can be filed under the electronic lodgement system and, secondly, that the Inland Revenue will randomly select 5,000 to 10,000 cases a year to vet for accuracy. That will be a time-consuming distraction and an expensive exercise for those who are chosen. It is purely to validate the Inland Revenue's selection procedures. Ernst and Young want Parliament and the Government to consider who should pay for that if nothing material emerges from the inquiry into those who are randomly selected to be hassled. Those issues should be considered and we simply seek the time to do so.

Mr. Tim Smith: May we conclude that the hon. Gentleman advocates that compensation should be paid to small businesses that are investigated as a result of a random sample?

Mr. O'Brien: The hon. Gentleman heard exactly what I said: that this House should understand the problems of businesses and the self-employed. I want the House not to commit itself now to spending money but to consider whether we should compensate those people. We should discuss it but we have not yet had an opportunity to do so, which is why we need the time proposed in our amendment.
We are also concerned about the absence of independent information on and evaluation of the new system. Taxation links between Parliament and the Government are part of the contract between the citizen and the state. The proposed new system of self-assessment will fundamentally alter the relationship between taxpayers and the state. However, the Government seem to have created no independent audit or source of information on the progress of implementing self-assessment, so neither taxpayers nor their representatives know how implementation is progressing. They do not know how the costs are worked out, how Inland Revenue staff are being prepared, what the form will be like, whether the new computer systems will be implemented successfully, or whether the project must meet certain performance targets if it is to operate successfully. Reports of difficulties are widespread. The only formal information available comes from the Inland Revenue, which is implementing the project, and its political masters, the Government.
Will the Minister say exactly what is happening with the electronic data systems? Are the reports that staff are being transferred from filing to self-assessment true? We need to know exactly what is happening because those are legitimate issues.
Forms are scheduled to arrive in spring 1997. If the whole self-assessment system fails, real problems could arise, putting considerable strain on the relationship between taxpayers and the Inland Revenue, and therefore between citizen and state. If the Minister will not accept one year's delay on the system's initiation, we propose to delay the filing arrangements in new section 8 of the Taxes Management Act 1970 by three months, from 31 January 1998 to 30 April 1998. The significant problems in operating the system merit further consideration. We simply ask for time to consider them.
You, Mr. Morris, may think that you have heard a thorough indictment of the Government's self-assessment policy, but you ain't heard nothing yet. At the same time


as introducing self-assessment, the Government are imposing another expensive burden on business. I know that you will find it difficult to believe, Mr. Morris, having heard all that windy rhetoric on deregulation, but what about the £850 million burden on business—the little extra Government windfall exposed on page 112 of the 1996–97 Red Book? In the same year as introducing self-assessment, the Government have decided to change taxation of the self-employed from a previous-year to a current-year basis.
Such a change alone would have had a massive impact; the two changes together will have an enormous impact. For one year, the self-employed will face a £850 million tax bombshell. It is a massive move with an enormous impact, which will come at a time when the self-employed will feel that they are being taxed twice, albeit they are not.

Mr. Jack: indicated dissent.

Mr. O'Brien: The assessment comes from the House of Commons Library so I am sure that the Minister will accept it. First, taxable profits will be assessed on a current rather than previous-year basis, so personal allowances will be set against the current rather than the previous year's profits, giving a normal uprating of allowances. If there is any doubt about that, hon. Members should look at page 112 of the Red Book and the Minister's explanation to The Independent, where he effectively confirmed that that would happen.

Mrs. Helen Jackson: A constituent who runs a small ladies' dressmaking business, which has worked with other small businesses in my constituency, told me that she had thought that self-assessment was a good idea if one was good at arithmetic and knew what one was doing. She had thought that it might save her money by making her less dependent on her accountant, who costs her £200 a year. But the more she looked into the matter, the more she saw that she would depend more on her accountant because of the complexity of the change and the extra rules being introduced.

Mr. O'Brien: Like my hon. Friend's constituent, many people will be afraid of what is happening, and their fear will be fully justified. We have studied the legislation and seen its complexities and how it will operate. My hon. Friend's intervention confirms our argument. We should give the process an extra year in which people may begin to understand what it is about, and give the Government an opportunity to begin to come to terms with the process, ensure that staff are properly trained, computer systems are running properly and all the software has been properly tested, all of which takes a considerable time. It is dangerous to rush into the process. If we are to deal with the problems that my hon. Friend's constituent fears, we need time to do it properly. It will be time well spent and it will pay dividends in the long term.
There seemed to be some doubt about the £850 million, so let us discuss it. It is made clear in the Red Book. My hon. Friend the Member for Oxford, East (Mr. Smith) exposed the issue. It was confirmed by the Inland Revenue to the House of Commons Library. The Independent highlighted it in an editorial. The Financial Secretary to the Treasury compounded the problem for

the Government when he admitted in a letter to that newspaper that extra money would come to the Government because of
bringing forward the moment when the tax bill has to be paid"—
his own words.
There will be a period of double taxation of profits, which will be relieved only in future years. As Ernst and Young has put it:
The Government is effectively obtaining an interest free loan during the currency of the business".
It will mean that self-employed people will end up paying more in a specific year than they planned. Coupled with increased administration costs, possible penalties and confusion, that may be the final straw for many businesses.
Self-assessment is an important opportunity for a radical rethink of tax collection. It is too good an opportunity to waste in this way. We support the principle of self-assessment. The Government appear unable to accept the dangers of the haste. The amendment gives time to stop and think and get it right.
Let me finish by warning the Government of the consequences of not accepting the amendment. Using the words of the great Scottish poet whose bicentennial we recall today—Rabbie Burns's words, which will apply at the next general election if self-assessment fails, and if the self-assessment forms in their buff envelopes thud on to the mats of Conservative Members' constituents:

"Still o'er the field the combat burns;
The Tories—Whigs—give way by turns
But fate-the word has spoken;
For woman's wit and strength of man,
Alas! can do but what they can
The Tory ranks were broken."

I ask the House to support the initial amendment and those that are grouped with it.

Mr. Forman: I begin by declaring the interest that is recorded in the Register of Members' Interests—my role as parliamentary adviser to the Institute of Chartered Accountants in England and Wales. I hasten to add that I do not speak to any brief from that organisation today, because that would be inappropriate under the new rules that the House has adopted. I merely speak against the background of extra information that I have gathered during my time in that capacity.
I listened carefully to the speech of the hon. Member for North Warwickshire (Mr. O'Brien). I am familiar with the hon. Gentleman because, until recently, he and I served on the Treasury Select Committee together, and I could see that he was enjoying himself and making a meal of a small set of points, if I may say so.
If I may distil the hon. Gentleman's argument, it was that there should be a further delay of one year in the implementation of that significant change for all taxpayers, whether individual or corporate, whether large firms or small firms, and that for a temporary period of one year—if I understood him correctly—the temporary penalties should be reduced from the 5 per cent. that the Bill specifies to 2.5 per cent.
The hon. Gentleman was making heavy weather of his arguments, probably because he did not give sufficient weight to some straightforward considerations.


As I understand it, the first consultative document, giving interested parties and the general public a hint that self-assessment was in the offing, was published as long ago as 1991, and the information that is the equivalent of a dummy run, in the sense of providing more hard signs of the way in which the scheme will work for taxpayers, has been available since 1994.
The hon. Gentleman based his argument on examples, which he described, of people being unaware of the changes and not being fully up to speed. As my hon. Friend the Member for Beaconsfield (Mr. Smith) said in his intervention, taxation is an unpleasant necessity in any society and individuals or corporations have a natural tendency, when they are busy, to place examination of those matters on the back burner until they absolutely have to do it. That is a human characteristic, an aspect of psychology; it applies to almost any deadline in human affairs. Taxation is no different; indeed, because taxation is unpleasant, there is obviously a natural tendency for people to put off thinking about it until the last minute. In all charity, to use the hon. Gentleman's word to him, all disagreeable deadlines tend to attract some responses of the type that he reported in his speech, and he should not make too much of that.
I happen to know, from contacts in my constituency, that most of my constituents are aware of many of the implications of self-assessment and are gearing up, with the help of accountants, or on individual initiative by investing in a tape recording or a videotape. In some ways, they look forward to the challenge of getting over the hurdle of the first year. That first year will obviously cause problems, but there are such things as photocopiers, and when one has got it right in the first year, that provides a model on which to base one's subsequent returns in later years.
To summarise, I am saying to the hon. Gentleman, first, that he has underrated the time that useful information that bears on the change has been in the public domain and available to taxpayers.

Mr. Mike O'Brien: Does the hon. Gentleman accept that, at the moment, no one can say that he knows exactly how the system will work? The Bill may be substantially amended in progress in Committee, and that could result in enormous changes. The hon. Gentleman need only consider the length, in the schedules in the Bill, of the amendments on amendments that have been made. No one yet knows what the rules are, no one can be prepared now for self-assessment, and I doubt that we shall be able to place people in the position in which they can be fully prepared for very many months—even those people who are working hard at preparing themselves.

Mr. Forman: Hitherto, only a fairly small percentage of taxpayers have had complicated tax positions. That minority, on whom the change might bear hardest, is composed of people who are frequently in fairly regular contact with their advisers, whether they be chartered accountants or others.
The hon. Gentleman underestimates the extent to which, in the process of being in contact with those professional advisers, and in the process of the paper

moving back and forth, not only between the taxpayer and the Inland Revenue but between the taxpayer and his or her adviser, the ordinary taxpayer learns and, as it were, comes to appreciate, not only the advice that he or she receives from advisers, but the position of the Inland Revenue.
I can assure the hon. Gentleman, even if he does not know it from experience, that, even as a layman, a person who has been in business or has had complicated tax affairs for some time learns about those matters, complicated though they may be. It is even easier when professional advisers are there to help out on difficult or contentious points.
To summarise, first, the hon. Gentleman underestimates the length of time for which useful information has been available to taxpayers and their advisers. Secondly, there is always a tendency for everyone to put disagreeable prospects in the drawer for a while and not pay attention to those things until nearer to deadlines. That would be true whether we adopted the deadline that the hon. Gentleman suggests of 12 months later, or stuck to our deadline, which I strongly recommend the Minister to do.
Thirdly, the hon. Gentleman did not mention the fact that, under the proposals, if corporate or individual taxpayers have considerable difficulties, they retain the option to ask the Revenue to help them or to provide what it judges to be the accurate figures for the taxpayer. In extremis, it is possible for a person who feels overcome by the burden and the complexity of the exercise to say, or write, to his inspector, "Please do it for me."
In those circumstances, the taxpayer always has the option, if he happens not to trust the inspector—which is unwise because in my experience, inspectors usually see to it that the people working for them treat those matters with accuracy and care, and mistakes are rarely made—to ask the Revenue to take on that task and to act, even slightly paternalistically, to help him through the transition period.
If things go wrong, there is an excellent person who may well be known to the hon. Gentleman and from whom I have had the benefit of a tax briefing: Elizabeth Filkin, the tax adjudicator. She can be brought in in extreme cases where the matter cannot be settled sensibly by discussions and correspondence between the Revenue and the taxpayer.
For all those reasons, I say to the hon. Gentleman, in a spirit of good will, that he exaggerates his case. He fans fears that have been expressed—to me, as well as to him—by the small business community. He would do a better service to his taxpaying constituents if he ensured that they received all the relevant information—if he acted as a conduit for the information, explanatory and otherwise, which is now being provided by the Revenue, and helped through the change. I believe that we must change. The net effect of the change, when implemented, will be beneficial to the country. It is a useful deregulatory measure that will simplify matters.

Mr. Malcolm Bruce: The hon. Member for North Warwickshire (Mr. O'Brien) has, at least, asked some important questions to which the Minister must respond. I accept that the hon. Member for Carshalton and Wallington (Mr. Forman) can readily find many sources, in his constituency and elsewhere, who are prepared for


self-assessment and who would regard a further delay for another year as a frustration and possibly even the cause of wasted expense.
I therefore agree that the hon. Member for Carshalton and Wallington has an argument, but, by the same token, other people are less prepared and they will face the problem of not knowing what is going on. They will run the risk of incurring penalties through lack of proper support and advice. Others may feel that they will have to incur for professional advice costs that they did not previously incur. It may ultimately benefit those people if they obtain the right sort of professional advice at the right sort of price. The accounting industry is no doubt in favour of the change as it is likely to create a substantial amount of business for it—after all, that is what it is there for.

Mr. Forman: Contrary to what the hon. Gentleman says, if, after the transitional period, people can master the new tax demands placed on them and fully understand what is expected of them, their tax bills could be reduced. My point about the photocopier was meant to show that, once people have created the right model, they can use it as the basis on which to go ahead and fill in their tax returns fairly confidently.

Mr. Bruce: I wholly accept the hon. Gentleman's point. In the past I have filled in my tax forms—I currently use an accountant, but only because I am too busy. I pay my accountant a fee; it suits him and he claims, now and again, to get me a better deal than I would have done. He is probably right to say that—not because I could not have got the deal for myself, but because I did not have the time to do so—but I am merely one individual.
My serious concern does not involve individuals, who will—particularly those on a routine income—easily find a formula to suit them, although the transitional period may be painful and difficult, and they may not be properly prepared. Some business men with smaller businesses, who have slightly more complicated matters to determine, may find, as the hon. Member for North Warwickshire said, that the measure creates considerable additional stress for them, on top of everything else.
The Conservative party prides itself on having good connections with, and an understanding of, small businesses. Having run small businesses myself, I know how difficult it is to run the business and to deal with the practicalities of processing orders and invoices, handling inquiries, ensuring that everything comes together and dealing with value added tax. Another administrative burden will mean that there is less time for producing and selling, and securing cash flow. None of those arguments is against self-assessment per se—our debate is about the timing of it. I accept that, whenever the policy is introduced, it will have its disadvantages and there comes a point when one has to bite the bullet and get on with it.
Another concern, which I raised in my earlier intervention, is that the measure is being introduced at a time when the Treasury and the Inland Revenue have undertaken dramatic reductions in their staff. I am not merely point scoring; the Minister may well be able to explain how the matter will be resolved. The headline in an article in Accountancy Age states:
Revenue cutbacks threaten chaos for self-assessment".

Such articles suggest that, within the accountancy profession, there is genuine concern that the Revenue will not be geared up for the volume of queries, complaints and requests for help and information that will flood in, particularly at a time when staff numbers have been substantially cut—by 3,000.
I shall give one or two quotes from the article at random. It states:
Ernst and Young's self-assessment specialist Philip Davis, said the Revenue would ensure the system would be implemented `come hell or high water', but warned the whole thing was being rushed through unnecessarily and too many problems remained.
He said: `If you look at the Finance Bill"'—
which is what we are here to do—
'''for instance, there are 16 pages of amendments in the 80 pages of self-assessment legislation covering areas which they didn't get right before'.
I hope that the Minister will. accept that I am simply raising the concerns of people working in the industry, who clearly believe that there is potentially a serious problem.
To some extent, I have an open mind on the amendment. I can see both sides of the argument. I am not in favour of pushing back proposals to which one is committed unless there is a good reason. If there are problems, such as cuts in staff and a belief that the issue's complexity has not been fully addressed, I would echo the argument of the hon. Member for North Warwickshire that the Government must recognise that, in an election year, this may not be the sort of chaos over which they want to preside.
I hope that there is clear good faith on the part of Labour Members that, if there is a change of Government in the next year, the principle of self-assessment will not be abandoned, its proposal to postpone the measure will be honoured and the measure will ultimately be implemented. I am not sure about—the hon. Member for North Warwickshire did not give it—the Labour party's policy on the delivery of self-assessment. It would be helpful to know whether the Labour party was in favour of it, against it or genuinely concerned about its timing. Having said that, I think that the hon. Gentleman made some important points and advanced his arguments very well.

Mr. Mike O'Brien: The hon. Gentleman asked for our view. If, having heard some of the arguments, the Government agree with us, the law will be changed. We may win the vote on the amendment even if the Minister does not support us. Perhaps some Conservative Back Benchers will defect—we have seen that happen. If the amendment is passed, the law will be changed and implementation of the measure will be delayed by a year, as we wish. That would also happen if and when we come into office. What happens will depend entirely on when we come into office and the circumstances at the time. If the process is in train, we shall have to evaluate the situation. We wish to ensure that the measure is implemented properly. We have to decide how that can best be achieved when we take control.

Mr. Bruce: I am grateful for that intervention, although I am not entirely sure what it means. I may well be prepared to take the balance of argument in the hon. Gentleman's favour and suggest that we postpone the measure for one year. If I thought that that would lead


to a further postponement, I would favour the argument of the hon. Member for Carshalton and Wallington that, ultimately, we must bite the bullet. The question is whether we go ahead now, knowing that there will be problems, but confident that we can overcome them and create a workable system, or whether we acknowledge that the problems of staff cuts and the lack of information justify postponing the measure to ensure that we can overcome the problems.
I quoted from the article from Accountancy Age to show that there are clearly people involved in the business who know much more about the subject than me and who believe that the policy could become an unmitigated shambles. The hon. Member for North Warwickshire mentioned the problems that we have all had to face over the Child Support Agency. Hon. Members on both sides of the House supported the proposal for the CSA and believed that it would work, but we all agree that it has been unsatisfactory. I was talking to a High Court judge last night. When I said that the CSA was an administrative shambles, he said—as only a High Court judge could—"No, no. You can't get away with that. Parliament got it wrong. You brought the consequence upon yourselves." We are talking about a parliamentary decision now, and we should not be partisan about it. One's attitude to the issue should not depend on one's political views.
The question is how we shall implement effectively the biggest reform in tax collection in British history since the introduction of pay-as-you-earn, with a minimum amount of disruption. It would be impossible to make such a change without disruption, but it should be minimal.
The Minister should tell us how he would respond to the critics in the profession. He should also tell us how the Revenue will be able to handle the change, given the dramatic reduction in staff and its lowered morale. Of course, people in the Inland Revenue Staff Federation have a vested interest in maintaining the numbers, but that is not a good enough reason to dismiss the fact that it is odd to introduce the biggest change ever against the background of the biggest single reduction in staffing ever in the relevant department. It is difficult to believe that the reduction will not aggravate the problems.

6 pm

Mr. Tim Smith: I wonder, Mr. Morris, what the most boring thing is that you have to do every year. You may tell us that it is listening to debates on taxation in the Finance Bill Committee. I suspect that many people, if asked that question, would say that it was completing their tax return. People do not give a high priority to their tax returns. They eventually get round to doing them when they know that if they did not do it, they would be in trouble with the Inland Revenue. It is not the most exciting task, and it is difficult to persuade people to take an interest in the measure, although it will be a major change.
The timing of the change does not matter. Some people will not face up to it until it happens and the form arrives on their doormat. That is what happened with financial services regulation in the Financial Services Act 1988. Some people simply shut their eyes to it until the very day the Act came into force, when they woke up and discovered for the first time that they were going to be regulated.
Let me remind you, Mr. Morris, what small businesses have to do now. From the debate so far, anybody would think that small businesses have no problems, but every small business and every schedule D taxpayer has to complete a tax return. They often send their tax returns in late. Frequently, by the time a business sends its form in, it has already received an alarming estimated assessment from the Inland Revenue, which inevitably—in 90 per cent. of cases—is pitched at a level higher than the business's profits, to protect the Revenue's position. The arrival of that estimated assessment is often one of the spurs to completing the tax returns. When the tax returns have been submitted, there may be queries on them or they may be accepted by the Revenue, but more paper comes back to the small business because the estimated assessment has to be amended to a final assessment.
Lots of paper is generated by present system. One of the great advantages of self-assessment, for those who choose to complete the form in its entirety, will be that they can work out how much tax they have to pay and send a cheque with their return. If they get it right—and there is no reason why people should not get it right, either on their own, because it is designed to be done unaided, or with help from an accountant—they can send the money in and that will be the end of the process. That will be a considerable improvement and simplification.
The change to self-assessment was announced in principle, as my hon. Friend the Member for Carshalton and Wallington (Mr. Forman) said, in 1991 before the general election. The decision to proceed with it was announced in the 1993 Budget. We debated it in some detail in the Finance Bill debates in 1994 and 1995. I know that the hon. Member for North Warwickshire (Mr. O'Brien) has come rather late to the subject, but this is not the first time that Parliament has debated it.
More importantly, it is not true that the Inland Revenue has no experience of dealing with self-assessment. It has bent over backwards to consult on that issue. For example, in Leicester, 5,000 taxpayers volunteered to take part in an experiment. That is remarkable and we should pay tribute to any taxpayers who volunteer to take part in such an experiment, because they have done all other taxpayers a great service.

Mr. Andrew Smith: Does the hon. Gentleman agree—as he implied by his use of the word "remarkable"—that those taxpayers who volunteered to fill in an extra tax return might not be entirely representative of taxpayers as a whole?

Mr. Tim Smith: That is very true, and I agree. The hon. Gentleman should recognise that one of the reasons for the changes is to ensure that those who are not among the best taxpayers—who are, as he implied, those who would volunteer—get equal treatment. That will cause difficulty.
The system of automatic penalties will cause difficulty and we have experienced that before. The Government introduced automatic penalties for VAT in the mid-1980s, which ran a predictable course. The new system was introduced and most taxpayers coped with it reasonably adequately. A minority made a fantastic noise, said that they had heard nothing about it and considered the whole system desperately unfair. A few minor changes were made at the margin and we heard very little more about


it. I wonder how many hon. Members now receive letters from constituents complaining about the VAT regime, with its harsh penalties, which was introduced in the mid-1980s. Very few, I suspect.
Of course there will be difficulties, because some taxpayers will not wake up to the changes when they are introduced. I recognise that they will not be the taxpayers who volunteered to take part in the Leicester experiment, but it was a valuable exercise. Ministers and the Revenue are to be commended on the extent to which they consulted. My hon. Friend the Minister wrote to all right hon. and hon. Members as recently as 20 November 1995, explaining the changes that have been made to the new tax return. He also explained that, as a result of consultation, the number of schedules attached to the tax return have been halved and that other improvements have been made to try to make the whole system more user-friendly.
I do not believe that delaying the introduction of self-assessment by another year would result in more taxpayers listening to the audio tape or reading the guidance. Those taxpayers who want to do that will do it now, because they run their businesses efficiently. There will always be those who say that they are too busy to do it now—they will be too busy to do it in a year's time. We should reject the amendment.

Mr. Bermingham: Two features worry me about self-assessment. I declare an interest as a practising lawyer and one of those who will have to self-assess. First, not all tax is paid on invoice. Paying on invoice means that if one delivers an invoice, one is deemed to earn the money in the year that the invoice is sent. Some of us are taxed on what is called a cash basis. For those, the problem has become a nightmare.
The problem affects practising lawyers, some accountants in smaller firms—who have been taxed on a cash basis historically—and many solicitors. The Inland Revenue has tried to wean people off being taxed on a cash basis over the years. It is a rare gift from the Revenue that it has allowed those who are taxed on a cash basis—for example, most members of the Bar—to cling on to that for what life is worth. Why do we cling on to it? Every time I render a bill on a legal aid matter, I do not know when I shall be paid. At the moment, on major cases, if a bill has not been paid after six months, one is entitled to 40 per cent. of it.

Mr. Tim Smith: indicated dissent.

Mr. Bermingham: The hon. Gentleman should come down and ask the lawyers what is happening.

Mr. Smith: It is crazy.

Mr. Bermingham: It is not only crazy, but to put it bluntly, it is a disgrace. The other day, I got a cheque for a case that I had finished six months before. I got 40 per cent. of my bill. That bill will now be taxed at some time in the next three to four months. I did a case last year that took a year to get paid. It was a small and simple matter, but there were no taxing masters in that area and everything was held up. How can I and many other lawyers actually project what we shall earn in a year, because that will depend on when we get paid? If we are

on a cash basis, there is no way in which we can be accurate. We can have a good year or a bad year. A bill can be paid after the end of the tax year because someone is sick and the cheques are not sent out. That happened the other day at the Old Bailey, when 500 cheques were held up because someone was sick. On that basis, there is no way in which we can project our earnings.
Lawyers are not the only ones who will suffer; others will have the same problem for a different reason. For example, those who do not operate on a cash basis will be taxed on the bills that they send out. Small companies—there are a number in my constituency—complain that they send their bills to large companies and they are lucky if they receive payment within three to six months. One hopes that they will be able to project what their tax liability might be in the current year, but it is an enormous guessing game. For many of the self-employed who are not big earners, the game will not be worth it any more. They will run the risk of penalty year in, year out and their cash flow problems will be a nightmare.
The Red Book also states that in one year taxpayers will pay two years' tax. That year will prove a nightmare for self-employed people, whether they are lawyers or plumbers. We must examine the situation realistically. In 1997–98, the self-employed must pay tax on the previous year. They will be able to calculate the amount accurately because they have their books, invoices and receipts. People will know exactly how much they have to pay. However, they are then supposed to self-assess for the current year. They might have a pretty shrewd idea about the amount based on historical profit figures or intake or gross receipt figures. However, in many professions, it will be difficult to calculate. People do not know who will walk through their office doors the next day. Lawyers do not know whether they will have big or small cases, or whether cases will collapse. They will have no way of estimating, although they will do their best.
I shall give the House an example. Mr. X is a plumber who lives somewhere in the mid-shires. He has reckoned that each year he earns about £40,000 gross. After he has deducted his expenses, his earnings amount to £20,000 a year. On a medium tax figure of 25 per cent. after various expenses, he may pay tax of £3,000 or £4,000 per year. In the year in question when he does his guesstimate for the year ahead, he must pay last year's tax as well as this year's tax. In that year, he must pay £8,000 in tax on his income of £20,000 when he would usually pay perhaps £3,000 or £4,000. But Mr. X must still pay his mortgage and feed his children.
Unless the Government do something about that problem, an awful lot of people—perhaps millions—will suffer hardship in that changeover year. The original proposal said that we should take an average over a number of years and then proceed, but that has now been amended. What will the self-employed do in that problem year? They play an important part in our economy—in fact, they are far more important than most people realise.
The self-employed do not work alone: they may employ two or three other people. People are classified as "self-employed" because they own their businesses; they are not a limited company. When presented with a cash flow problem, they have two choices: they can lay off employees—which is not a good idea if our economy is to recover—or they can simply say, "I've had enough; I shall go and work for someone else."
It is very easy for Treasury officials—I mean them no disrespect—to think up a wonderful way of ensuring that everyone is on the same system, without considering the implications. The measure will not affect them as they are pay-as-you-earn, just like Members of Parliament. However, many people in my constituency are not PAYE. Every year they calculate their tax honourably and honestly and pay it on 1 July and 1 January. In the year that the measure is introduced, they will be faced with not only the bill for the year for which they have received the income, but the bill for the year upon which they are being assessed. Those who operate on a cash basis or those who have not been paid by large companies that have delayed payment will face an exaggerated cash flow problem.
I have already given the example of the young barrister, solicitor or accountant who estimates the income that he will receive in a year. However, he may find that, instead of several small cases, he has one large case. He then faces a central taxing unit problem and he may not be paid for a year or more—often he will receive no payments for at least nine months. He may then find that there is an enormous cash flow problem and, unless his bank manager is kind, there is no way that he will come through it.
6.15 pm
The Government should realise, in all fairness, that many of those in the professions and many of the self-employed borrow money from their banks in order to keep going, in the hope that the money will be forthcoming. Meanwhile, they continue to pay interest on their borrowings. There is a similar problem for those who are paid by large companies or Government bodies, such as the Lord Chancellor's Department—I do not wish to be personal in my remarks—or other Departments of State, which often make people wait three to six months for their money. While those Departments are earning interest, people are paying interest.
I know that part of one's overdraft interest is allowable against taxation, particularly on a business account, but it never quite makes up for the loss. By delaying payment to the self-employed who are working for them, the Government are making money while they are costing the self-employed money. In such circumstances, there should be a time limit for payment—two to three months seems fair, but six to nine months seems grossly unfair. I have made that point publicly on behalf of the professions and that is why I declared my interest at the beginning of my speech.
I outline two problems to the Minister. Those who operate on a cash basis will face a difficult guessing game. We are professionals and we shall cope with it somehow, but we need more time to get our advisers into position to deal with it. That is why I support the amendment. I say very earnestly, on behalf of millions of people, that the new change, which will effectively mean a year of double taxation—

Mr. Tim Smith: No.

Mr. Bermingham: The hon. Gentleman denies it. I invite him to reassure me and millions of others like me, because that is how it reads in the Red Book.

Mr. Smith: As I understand it, during the transitional period we shall take two years' profits, add them together,

divide by two and we shall be taxed on that amount. Effectively, one year is left out, so there can be no question whatever of double taxation.

Mr. Bermingham: I am grateful to the hon. Gentleman. He is an accountant and I respect his knowledge of accountancy. However, that is not how my advisers and their accountants or the professions' advisers have said that it would work. We are very concerned about the interpretation of the Red Book. If the Minister will come to the Dispatch Box and tell me that I, and millions of others, will not be doubly taxed and that we shall pay about the same rate of tax in that year as in the year before and the year after, I shall sit back and say, "One of my worries has gone." At least I shall have that concession.

Mr. Forman: The hon. Gentleman should come here more often.

Mr. Bermingham: Mr. Morris, he is a very rude man; but academics are always rude because they are always ignorant.
I conclude with this simple cri de coeur. I have met many tax inspectors and employers, and they have always been extremely helpful and kind. However, many ordinary people will need a lot of help during the transition period. Therefore, I believe that training should take place and that the period must be extended. I seek the Minister's assurance on the second part of my great worry. If I receive it, I shall go home—notwithstanding the odd crack from the hon. Member for Carshalton and Wallington (Mr. Forman)—a much happier man. But, then again, I was always a simple person at heart.

Mr. Jack: Opposition Members know that, from time to time, I have been known to be combative on particular subjects for debate, but on this occasion I shall put aside my sword and shield and deal rationally with some of the important points that have been raised. Light and enlightenment is what I shall deal supply this evening.
I thank all hon. Members who contributed to the debate, because if there is one thing that self-assessment still requires, it is discussion. The more we discuss it, the more knowledge we shall gain about it. I do not want to stand at the Dispatch Box and make outrageous claims that there will not be problems between now and the introduction of self-assessment, as it is a big change, and it is complex, but it is being managed by the most professional people with whom I have had the very great pleasure to deal—the Inland Revenue.
I shall put on record precisely what we are dealing with in self-assessment. We are dealing with the collection of information, albeit in a new way, to determine people's liability and the ultimate payment of taxes, which will not change as a result of self-assessment. People will know about their tax liability, in the sense that they have a tax on their income, on their investment, on the profit that they receive from rent, or on the profits that they receive from their business. That area will be familiar.
The hon. Member for Gordon (Mr. Bruce), who made a balanced and helpful contribution, asked about the enormity of the introduction of self-assessment. Indeed, the hon. Member for North Warwickshire (Mr. O'Brien) asked whether it would be the equivalent of the Child


Support Agency. I was relatively new to self-assessment when I took over my present appointment, and I can remember some of the difficulties. Let me try to put their minds at rest.
The CSA was doing two things: first, it was introducing a brand new policy; and, secondly, it was putting in place a brand new information technology system to deal with it. With self-assessment, the Inland Revenue is wholly familiar with the taxes, the way in which collection has to be carried out, and, most importantly, the volume of business that it will have to deal with. It was meticulous in the specification of the system that it requires to deal with that volume. I hope that hon. Members will be reassured by that.

Mr. Andrew Smith: Has not the Financial Secretary dug the hole deeper for himself by saying that the CSA's problems arose because it did two things at once? Are not the Government doing the same by changing to self-assessment and changing the basis for assessment from the previous year to the current year? They may be separate exercises, but they will greatly complicate procedures for the self-employed, and the experience will not be dissimilar from that of the CSA.

Mr. Jack: I shall deal with that in a moment. The hon. Gentleman will be aware that there is already confusion in the way in which the current tax system operates. For example, for a business that has trading profits and an income from, say, renting accommodation, the accommodation is dealt with on a current year basis, and the trading profit is dealt with on a previous year basis. Self-assessment is about bringing them on to the same timetable. Surely that is a recipe for clarity, not confusion.
My hon. Friends the Members for Beaconsfield (Mr. Smith) and for Carshalton and Wallington (Mr. Forman) shone an important light on the reality of what we are dealing with, in their sage, short, but very important interventions. My hon. Friend the Member for Carshalton and Wallington helped to tease out the fact that self-assessment will not affect some 20 million taxpayers. For them, the world will not change. Their only instruction, if one likes, at this stage is to ensure that they keep hold of their records, because their circumstances might change in future, and they could become the subject of self-assessment. For those who do not receive a tax return, the basic message is that nothing will alter. We are discussing the situation for the 9 million taxpayers who receive a tax return.
My hon. Friend the Member for Beaconsfield was right when he pointed out that the matter has been thoroughly debated in the House. It was unworthy of the Opposition to worry people unnecessarily by picking up in the press at the beginning of the year a number of factors on self-assessment, for what I deem to be rather cheap party political advantage, when we are striving to reassure and educate people.
We have been working very hard on information for the taxpayer. None of this has been the invention of minds in the Inland Revenue or the Treasury. We consulted very thoroughly indeed in all the preparations. We have the self-assessment consultative committee. It is representative of individual taxpayers, all sections of business, whether large or small, and it has contributed fulsomely to ensure that we refine the system to a state where it will work.
My hon. Friend the Member for Beaconsfield touched on the trial in Leicester. I am not certain whether the hon. Member for North Warwickshire has been to one of our presentations in the House.

Mr. Mike O'Brien: indicated assent.

Mr. Jack: I am delighted to see that he has. He will know how thorough we are on self-assessment. I wanted to know whether it would work, because I had rehearsed in my mind some worries, which hon. Members put before me this evening.
I was advised that a real-life trial was under way in Leicester, with 5,000 real taxpayers, who had been recruited by the Inland Revenue, which had written to employers, including local authorities and individual taxpayers, some with advisers and some without. The trial was proceeding successfully. The tax office was dealing with the forms. I said that I did not want to go on a glossy trip or just to see the computer screens. I wanted to meet some of the real taxpayers who were taking part.
Six people were selected. They included representatives, agents, self-employed people, a consultant—a whole range of individuals, even PAYE. They gave me quite a hard time. They gave a candid assessment of what it was like. It was interesting. Some had difficulty—those who, like me, take the video recorder out of the box, plug it in, press the buttons and wonder why it does not work. But those who read the carefully tailored instructions and went through them completed the form successfully. They made points to me about revising and refining the questions, and, as my hon. Friend the Member for Beaconsfield said, we have substantially cut the paperwork involved. We learned from the practical trial.
6.30 pm
I must tell the hon. Member for North Warwickshire that we are planning to go to Southampton this year with a trial of 13,000 real taxpayers. That makes this exercise fundamentally different from other major changes involving new information technology systems. We are trying the system out. We are not dealing with the untried and the unknown. We are making certain that we proceed on the basis of fact. It is a great pity that the hon. Member for North Warwickshire, who has teased out everybody's concern to form a speech in the debate, had not reflected on what we are doing.
The hon. Member for Gordon asked important questions. He posed an interesting point when he asked whether the Opposition had truthfully considered their position on this matter. He was right to ask that, because it strikes me that there are some consequences that they have not considered.
I wondered why, for example, the hon. Member for North Warwickshire did not take us through all the consequences of his amendment. He invites the House to support three amendments—two on delay and one on penalties—but he did not take us through the knock-on consequences. That is just shoddy. The hon. Member for Gordon might like to know that the Opposition did not propose any alternative mechanism for the Inland Revenue to collect taxes and make assessments in 1996–97.
The opposition did not tell us precisely which parts of the self-assessment reform package they propose to defer. I wonder if they have given any thought to what is involved in delay. Cost savings will result, so has the hon. Member for North Warwickshire the express permission of the shadow Chancellor to say that he will underscore the extra cost involved in dishing out a further 4.5 million assessments, which result from delaying the system for another year? The hon. Gentleman seeks to delay the benefit that will accrue to the self-employed and those who are required to fill in a tax assessment.
I could go on, but it is clear that the hon. Gentleman, who gave the impression of having looked meticulously at every detail, has not considered the matter in detail. He is advocating that the House tonight should support a recipe for chaos. If the amendments were agreed to tonight, they would result in a complete muddle. The hon. Member for Gordon is right. He has teased out an omission in the Opposition's case.
The hon. Member for Gordon also rightly asked about resources. The Inland Revenue is appropriately staffed to meet the requirements. I can assure the hon. Gentleman that the Inland Revenue is adequately resourced. The resulting staff reduction will be achieved by natural wastage. The very fact that we have invited EDS, one of the world leaders, to help to develop the IT system, shows our determination to ensure that the project is properly managed.
This week, I had the pleasure of going to the central point in the Revenue which is monitoring the implementation of the project. I can assure the hon. Gentleman that each and every aspect is being meticulously managed—from the point of view of IT, personnel and training. It is one of the most remarkable project management exercises. When it is done—I believe that it will be done successfully—people will admire the Inland Revenue for its professionalism and thoroughness. However, it is realistic. It knows that there will be problems. It does not shy away from that. But the hon. Gentleman was right to ask about that.
A moment ago, I centred on the facts of the matter. Why are we having self-assessment? I am grateful for the acknowledgement of the hon. Member for North Warwickshire that his party accepts self-assessment in principle. It has supported it in principle for two years. But all of a sudden, we hear various disparaging comments.
What we are seeing is the introduction of the Keith committee's recommendations. That process has been on the go since 1983. The current system of tax assessment is time-consuming, confrontational and, I think all would agree, unsatisfactory.
At present, the Inland Revenue will issue an estimated assessment to a self-employed taxpayer and, perhaps because of a delay in drawing up accounts or filing returns, there may be problems. If the assessment is not agreed, an appeal will have to be lodged and an application made to postpone tax payments. Every year, about 1.5 million such processes have to be considered by the special commissioners. If the taxpayer concerned has a source of income other than that from his business, he must go through the same process all over again.
Under self-assessment, self-employed taxpayers—of whom there are about 4 million, so we have an interest in them, to which the hon. Member for St. Helens, South (Mr. Bermingham) adverted—will find that their self-employment income is taxed on the same basis as other income, as I said a moment ago. They will pay tax only on profits earned—no more, no less. That deals with the Opposition's attempt to run the scare story that there would be some double tax hit.
Let me take the hon. Member for St. Helens, South and his hon. Friends through a little exercise that I undertook. I wanted to be certain that I did not stand at the Dispatch Box and mislead people about the averaging process. My hon. Friend the Member for Beaconsfield put his finger on the important point that that process of averaging and catching up has now begun. If we were to support the Opposition's request for a delay, we would have an even more muddled situation on our hands.
I asked for an example of what would happen to a business earning a constant stream of taxable profit, which would mean that the tax demand would not change. The analysis was that neither would the payments. They would be the same in January and in July, throughout the years of introduction.

Mr. Andrew Smith: The Minister is right to say that, if there is a constant level of the same profits, the payments will be the same, but if there are rising profits, will there not be a higher burden in any given year? The Minister, in his letter to The Independent, put the £850 million extra tax yield in the Red Book down to business profitability and bringing forward the moment when the tax bill has to be paid. How much of that £850 million is due to rising business profitability, and how much is due to bringing forward the date of payment?

Mr. Jack: The hon. Gentleman has practically answered his own question. A rising trend of profits means that there will be more profits to tax. That is why, against a rising trend of profits, the Red Book shows an increase. If the hon. Gentleman had read the fine print, he would have seen that it was against original baseline figures. Therefore, we are acknowledging that there is a change.
It is a bit like putting the clocks forward. There is the same amount of taxable profit, but we get at it a bit earlier. Do not forget that those are profits that business has already earned. The money is in the bank. Businesses on any given level of profit will not pay any more or any less tax than is necessary.
Other factors affect the figure in the Red Book. I have already said that other forms of income are subject to the change in the tax—we believe that it amounts to about £713 million in terms of rising profit trends. I should have thought that the hon. Gentleman would have been rather pleased about the fact that we are projecting rising business profitability. Perhaps it embarrasses him because it is a sign of the growing strength that we anticipate in the British economy.
I think that I heard the hon. Gentleman accept that, if we had a constant level of profit, there would be no double hit.

Mr. Andrew Smith: indicated assent.

Mr. Jack: I am delighted to see that the hon. Gentleman agrees. If he agrees with that, he must agree that there can be no double tax on business. I am glad that we have settled that across the Dispatch Box.

Mr. Smith: Is there or is there not an extra £850 million tax yield in the year shown in the Red Book?

Mr. Jack: If the hon. Gentleman reads the fine print, he will clearly see that, against the index level, more tax is coming in because more taxable profit is available. That is a most important point.

Mr. Bermingham: rose—

Mr. Jack: Time is against me. The hon. Gentleman has had his say, and I need mine.
I pray in aid some supporters of not slowing down the process of introduction of self-assessment. Colin Sharman, a senior partner of KPMG, said:
Recent calls for delay in its implementation and re-examination of its scope are misplaced.
He went on:
The project has been well managed by the Revenue with a thorough communication process. Fundamental change of this nature is never easy, but it is well overdue.
That is an important supporting point.
Mr. Brodie of Taxaid said:
This really is a major improvement.
Those and the many others who have spoken in favour of self-assessment should be heeded.
Mr. Grant Thornton of the East Anglian Daily Times said that he believed that self-assessment represented a significant simplification of the old system and that once the new rules were in place it would be much easier for everybody to understand.
The Inland Revenue is well prepared. It is carrying out a massive information exercise. Many thousands of people have already come to our seminars. Much information will be given during the course of the year. I assure the House that no stone will be left unturned to ensure that all concerned understand self-assessment. But if we were to follow the Opposition's line on delay, it would be a recipe for disaster and problems. As for their point about the penalty, it only applies to the penalty on the final payment. I do not think that they would want laxity to creep into the arrangements for the necessary regulation to ensure that people pay their taxes on time.
For all those reasons, I urge the House to reject the amendments.

Mr. Andrew Smith: The Minister, and Conservative Members generally, will come to rue the day that they turned down the opportunity to defer self-assessment to enable it to be introduced more efficiently. In this context as in so many others, one word screams out from the Conservative Benches: complacency. Conservative Members are complacent about the scale of the problems posed by the introduction of self-assessment, and they are complacent about the effects on millions of self-employed people and small businesses, and the other costs that business will incur.
The hon. Member for Beaconsfield (Mr. Smith) said that the proposal had been announced in 1993, and had been in the Finance Acts 1994 and 1995. Given that we have been through the process so often, why does the current Bill contain all these clauses? Why have the Government not managed to get it right in all that time?
The Minister assured us that, following the Leicester trials, further trials are now to take place in Southampton. How will the errors be corrected if those trials show up matters that will require further change? The Government are not allowing the time that is needed. A stream of accountants, commentators and representatives of small businesses—cited by my hon. Friend the Member for North Warwickshire (Mr. O'Brien)—are alarmed by the way in which the Government are rushing ahead.
The hon. Member for Carshalton and Wallington (Mr. Forman) seemed to place considerable reliance on the assistance provided by photocopiers. Valuable though such devices are, if the hon. Gentleman thinks that he will get away with simply photocopying last year's tax return and sending it in for the following year, he will come a cropper. The hon. Member for Gordon (Mr. Bruce)—who has left the Chamber—recognised the problems, but did not seem sure whether he and his hon. Friends would join us in the Division Lobby. We shall note how they vote, and we shall remind the electorate if they do not support this opportunity to provide time to get the self-assessment regime right.
My hon. Friend the Member for St Helens, South (Mr. Bermingham) drew attention to the problems facing professions involving variable cash flow, and to what he rightly described as the guessing game that would confront them in the event of a gap between the sending of an invoice and the receipt of cash. He spoke of the devastating effect that the bungled introduction of the regime could have on prospects of self-employment, and on people's confidence not only in the tax regime but in enterprise and self-employment as a way of earning a living.
The Minister has not given us the assurances that self-employed people and small businesses would want to hear. He has not dealt satisfactorily with the issues that we have raised in relation to the £850 million extra tax imposition. We had an interesting discussion about cash flow and the fact that people might be affected differently in different circumstances, but the Minister cannot deny the existence of the extra £850 million tax yield, which is in the Red Book. Someone will be paying that extra money, and it will not be the Minister; it will be the 9 million self-employed people and small businesses.

Mr. Jack: rose—

Mr. Smith: It seems that the Minister is about to volunteer to pay the £850 million.

Mr. Jack: I thought that the hon. Gentleman had followed the argument. The answer is that there will be no extra tax hit on businesses. There is no double taxation. As I told the hon. Gentleman, the extra sum against indexation was a result of the rising profit trend. He agreed with me a moment ago; this shows how confused he is.

Mr. Smith: The Minister does not deny—he cannot, because his own Red Book shows it—that there will be


an extra tax yield of £850 million. However much they may wriggle and squirm, it is small businesses and the self-employed who will pay that extra money. I promise the Minister and his hon. Friends that we shall remind the electorate, and the small businesses and self-employed people who suffer the consequences of that imposition, who is responsible for the way in which it has been landed on them.
The Minister also did not deal with all the problems of complexity, and the difficulties that the Revenue is experiencing—not withstanding its professionalism, to which I pay tribute—in completing the final version of the tax form. He did not deal with the recurrent costs to the self-employed. He did not deal with the point made by my hon. Friend the Member for North Warwickshire about the danger of a different and more confrontational relationship between taxpayers and tax authorities; and he did not deal with the additional burdens on employers of all kinds, who will face more demands for extra information from both tax authorities and their employees.
There can be no doubt that self-assessment, as introduced by the present Government, has enormous and damaging potential to turn an important change into a formidable crisis for small businesses and the self-employed. Opposition Members urge the Government, even now, to start listening, and to provide the time that will allow us to get the position right. It is clear from everything that the Minister has said that it is not right yet.

Question put, That the amendment be made:—

The Committee divided:Ayes 213,Noes 268.

Division No. 36]
[6.45 pm


AYES


Abbott, Ms Diane
Clelland, David


Adams, Mrs Irene
Clwyd, Mrs Ann


Ainsworth, Robert (Cov'try NE)
Coffey, Ann


Allen, Graham
Cohen, Harry


Anderson, Donald (Swansea E)
Connarty, Michael


Anderson, Ms Janet (Ros'dale)
Cook, Frank (Stockton N)


Armstrong, Hilary
Cook, Robin (Livingston)


Ashton, Joe
Corbett, Robin


Austin-Walker, John
Corbyn, Jeremy


Barnes, Harry
Corston, Jean


Battle, John
Cousins, Jim


Benn, Rt Hon Tony
Cunningham, Jim (Covy SE)


Bennett, Andrew F
Cunningham, Roseanna


Benton, Joe
Dafis, Cynog


Bermingham, Gerald
Dalyell, Tam


Berry, Roger
Darling, Alistair


Betts, Clive
Davidson, Ian


Blair, Rt Hon Tony
Davies, Bryan (Oldham C'tral)


Bray, Dr Jeremy
Davies, Rt Hon Denzil (Llanelli)


Brown, Gordon (Dunfermline E)
Davies, Ron (Caerphilly)


Brown, N (N'c'tle upon Tyne E)
Denham, John


Burden, Richard
Dixon, Don


Byers, Stephen
Dobson, Frank


Caborn, Richard
Dowd, Jim


Callaghan, Jim
Eagle, Ms Angela


Campbell. Ronnie (Blyth V)
Eastham, Ken


Campbell-Savours, D N
Etherington, Bill


Canavan, Dennis
Evans, John (St Helens N)


Cann, Jamie
Fatchett, Derek


Chisholm, Malcolm
Field, Frank (Birkenhead)


Church, Judith
Fisher, Mark


Clapham, Michael
Flynn, Paul


Clark, Dr David (South Shields)
Foster, Rt Hon Derek





Foulkes, George
Moonie, Dr Lewis


Fyfe, Maria
Morgan, Rhodri


Galbraith, Sam
Morley, Elliot


Galloway, George
Morris, Estelle (B'ham Yardley)


Gapes, Mike
Morris, Rt Hon John (Aberavon)


Garrett, John
Mowlam, Marjorie


George, Bruce
Mudie, George


Gerrard, Neil
Mullin, Chris


Gilbert, Rt Hon Dr John
Murphy, Paul


Godman, Dr Norman A
O'Brien, Mike (N W'kshire)


Godsiff, Roger
Olner, Bill


Golding, Mrs Llin
Orme, Rt Hon Stanley


Gordon, Mildred
Pearson, Ian


Grant, Bernie (Tottenham)
Pendry, Tom


Griffiths, Win (Bridgend)
Pickthall, Colin


Grocott, Bruce
Pike, Peter L


Gunnell, John
Powell, Ray (Ogmore)


Hain, Peter
Prentice, Bridget (Lew'm E)


Hall, Mike
Prentice, Gordon (Pendle)


Hattersley, Rt Hon Roy
Prescott, Rt Hon John


Henderson, Doug
Primarolo, Dawn


Heppell, John
Purchase, Ken


Hinchliffe, David
Quin, Ms Joyce


Hoey, Kate
Radice, Giles


Home Robertson, John
Randall, Stuart


Hoon, Geoffrey
Raynsford, Nick


Howarth, Alan (Strat'rd-on-A)
Reid, Dr John


Howarth, George (Knowsley North)
Robertson, George (Hamilton)


Howells, Dr Kim (Pontypridd)
Robinson, Geoffrey (Co'try NW)


Hoyle, Doug
Rogers, Allan


Hughes, Robert (Aberdeen N)
Rocker, Jeff


Hughes, Simon (Southwark)
Ross, Ernie (Dundee W)


Hume, John
Rowlands, Ted


Hutton, John
Ruddock, Joan


Illsley, Eric
Salmond, Alex


Jackson, Glenda (H'stead)
Sedgemore, Brian


Jackson, Helen (Shef'ld, H)
Sheerman, Barry


Jamieson, David
Sheldon, Rt Hon Robert


Jones, leuan Wyn (Ynys Môn)
Shore, Rt Hon Peter


Jones, Jon Owen (Cardiff C)
Simpson, Alan


Jones, Lynne (B'ham S O)
Skinner, Dennis


Kaufman, Rt Hon Gerald
Smith, Andrew (Oxford E)


Keen, Alan
Smith, Chris (Isl'ton S & F'sbury)


Kennedy, Jane (L'pool Br'dg'n)
Smith, Llew (Blaenau Gwent)


Khabra, Piara S
Snape, Peter


Kilfoyle, Peter
Soley, Clive


Lestor, Joan (Eccles)
Spearing, Nigel


Litherland, Robert
Speller, John


Livingstone, Ken
Squire, Rachel (Dunfermline W)


Llwyd, Elfyn
Steinberg, Gerry


McAllion, John
Stevenson George


McAvoy, Thomas
Stott, Roger


McCartney, Ian
Strang, Dr Gavin


McCartney, Robert
Taylor, Mrs Ann (Dewsbury)


Macdonald, Calum
Timms, Stephen


McFall, John
Touhig, Don


McKelvey, William
Turner, Dennis


McLeish, Henry
Vaz, Keith


McNamara, Kevin
Walker, Rt Hon Sir Harold


MacShane, Denis
Walley, Joan


McWilliam, John
Wareing, Robert N


Madden, Max
Watson, Mike


Mahon, Alice
Welsh, Andrew


Mendelson, Peter
Wicks, Malcolm


Marek, Dr John
Wigley, Dafydd


Marshall, David (Shettleston)
Williams, Rt Hon Alan (Sw'n W)


Martin, Michael J (Springburn)
Williams, Alan W (Carmarthen)


Martlew, Eric
Wise, Audrey


Maxton, John
Worthington, Tony


Meacher, Michael
Wright, Dr Tony


Meale, Alan
Young, David (Bolton SE)


Michael, Alun



Michie, Bill (Sheffield Heeley)
Tellers for the Ayes:


Milburn, Alan
Mr. Eric Clarke and


Miller, Andrew
Mr. Greg Pope.


Mitchell, Austin (Gt Grimsby)







NOES


Ainsworth, Peter (East Surrey)
Emery, Rt Hon Sir Peter


Aitken, Rt Hon Jonathan
Evans, David (Welwyn Hatfield)


Alison, Rt Hon Michael (Selby)
Evans, Jonathan (Brecon)


Allason, Rupert (Torbay)
Evans, Nigel (Ribble Valley)


Alton, David
Evans, Roger (Monmouth)


Amess, David
Evennett, David


Ancram, Michael
Faber, David


Arbuthnot, James
Fabricant, Michael


Arnold, Jacques (Gravesham)
Field, Barry (Isle of Wight)


Arnold, Sir Thomas (Hazel Grv)
Fishburn, Dudley


Ashby, David
Forman, Nigel


Atkinson, Peter (Hexham)
Forsyth, Rt Hon Michael (Stirling)


Baker, Rt Hon Kenneth (Mole V)
Fox, Dr Liam (Woodspring)


Baker, Nicholas (North Dorset)
Fox, Sir Marcus (Shipley)


Baldry, Tony
French, Douglas


Banks, Robert (Harrogate)
Gale, Roger


Bates, Michael
Gallie, Phil


Batiste, Spencer
Gardiner, Sir George


Beggs, Roy
Gill, Christopher


Berth, Rt Hon A J
Gillen, Cheryl


Bellingham, Henry
Goodlad, Rt Hon Alastair


Bendall, Vivian
Goodson-Wickes, Dr Charles


Beresford, Sir Paul
Gorman, Mrs Teresa


Biffen, Rt Hon John
Gorst, Sir John


Bonsor, Sir Nicholas
Grant, Sir A (SW Cambs)


Booth, Hartley
Greenway, Harry (Ealing N)


Boswell, Tim
Greenway, John (Ryedale)


Bottomley, Peter (Eltham)
Griffiths, Peter (Portsmouth, N)


Bowis, John
Gummer, Rt Hon John Selwyn


Boyson, Rt Hon Sir Rhodes
Hamilton, Rt Hon Sir Archibald


Brandreth, Gyles
Hampson, Dr Keith


Brazier, Julian
Hanley, Rt Hon Jeremy


Bright, Sir Graham
Hannam, Sir John


Brooke, Rt Hon Peter
Hargreaves, Andrew


Brown, M (Brigg & Cl'thorpes)
Harris, David


Browning, Mrs Angela
Hawksley, Warren


Bruce, Malcolm (Gordon)
Hayes, Jerry


Butcher, John
Heald, Oliver


Butler, Peter
Heathcoat-Amory, David


Butterfill, John
Hendry, Charles


Carlisle, John (Luton North)
Heseltine, Rt Hon Michael


Carlisle, Sir Kenneth (Lincoln)
Higgins, Rt Hon Sir Terence


Carrington, Matthew
Hogg, Fit Hon Douglas (G'tham)


Carttiss, Michael
Horam, John


Cash, William
Hordern, Rt Hon Sir Peter


Chapman, Sir Sydney
Howard, Rt Hon Michael


Clappison, James
Hughes, Robert G (Harrow W)


Clark, Dr Michael (Rochford)
Hughes, Simon (Southwark)


Clarke, Rt Hon Kenneth (Ru'clif)
Hunt, Rt Hon David (Wirral W)


Clifton-Brown, Geoffrey
Hunter, Andrew


Coe, Sebastian
Jack, Michael


Colvin, Michael
Jenkin, Bernard


Congdon, David
Jessel, Toby


Coombs, Simon (Swindon)
Johnson Smith, Sir Geoffrey


Cormack, Sir Patrick
Jones, Gwilym (Cardiff N)


Couchman, James
Jones, Robert B (W Hertfdshr)


Cran, James
Kellett-Bowman, Dame Elaine


Currie, Mrs Edwina (S D'by'ire)
Key, Robert


Davies, Chris (L'Boro & S'worth)
King, Rt Hon Tom


Davies, Quentin (Stamford)
Kirkhope, Timothy


Davis, David (Boothferry)
Kirkwood, Archy


Day, Stephen
Knapman, Roger


Deva, Nirj Joseph
Knight, Mrs Angela (Erewash)


Devlin, Tim
Knight Rt Hon Greg (Derby N)


Dorrell, Rt Hon Stephen
Knight, Dame Jill (Bir'm E'st'n)


Douglas-Hamilton, Lord James
Knox, Sir David


Dover, Den
Kynoch, George (Kincardine)


Duncan, Alan
Lait, Mrs Jacqui


Duncan-Smith, Iain
Lamont, Rt Hon Norman


Durant, Sir Anthony
Lang, Rt Hon Ian


Eggar, Rt Hon Tim
Lawrence, Sir Ivan


Elletson, Harold
Legg, Barry





Leigh, Edward
Shepherd, Richard (Aldridge)


Lennox-Boyd, Sir Mark
Shersby, Sir Michael


Lester, Sir James (Broxtowe)
Sims, Roger


Lidington, David
Skeet, Sir Trevor


Lilley, Rt Hon Peter
Smith, Tim (Beaconsfield)


Lloyd, Rt Hon Sir Peter (Fareham)
Smyth, The Reverend Martin


Lyell, Rt Hon Sir Nicholas
Soames, Nicholas


MacKay, Andrew
Spencer, Sir Derek


McLoughlin, Patrick
Spicer, Sir James (W Dorset)


McNair-Wilson, Sir Patrick
Spicer, Sir Michael (S Worcs)


Madel, Sir David
Spink, Dr Robert


Maginnis, Ken
Spring, Richard


Maitland, Lady Olga
Sproat, Iain


Malone, Gerald
Squire, Robin (Hornchurch)


Mans, Keith
Stanley, Rt Hon Sir John


Marlow, Tony
Steen, Anthony


Marshall, John (Hendon S)
Stephen, Michael


Marshall, Sir Michael (Arundel)
Stern, Michael


Martin, David (Portsmouth S)
Stewart, Allan


Mawhinney, Rt Hon Dr Brian
Streeter, Gary


Merchant, Piers
Sumberg, David


Mills, Iain
Sweeney, Walter


Mitchell, Andrew (Gedling)
Sykes, John


Mitchell, Sir David (NW Hants)
Tapsell, Sir Peter


Molyneaux, Rt Hon Sir James
Taylor, John M (Solihull)


Monro, Rt Hon Sir Hector
Taylor, Sir Teddy (Southend, E)


Montgomery, Sir Fergus
Temple-Morris, Peter


Needham, Rt Hon Richard
Thomason, Roy


Nelson, Anthony
Thompson, Sir Donald (C'er V)


Neubert, Sir Michael
Thompson, Patrick (Norwich N)


Newton, Rt Hon Tony
Thurnham, Peter


Nicholls, Patrick
Townsend, Cyril D (Baxl'yh'th)


Nicholson, David (Taunton)
Tracey, Richard


Norris, Steve
Tredinnick, David


Onslow, Rt Hon Sir Cranley
Trend, Michael


Oppenheim, Phillip
Trotter, Neville


Ottaway, Richard
Twinn, Dr Ian


Page, Richard
Vaughan, Sir Gerard


Paice, James
Viggers, Peter


Pattie, Rt Hon Sir Geoffrey
Wakiegrave, Rt Hon William


Pawsey, James
Walden, George


Peacock, Mrs Elizabeth
Walker, Bill (N Tayside)


Porter, David (Waveney)
Waller, Gary


Portillo, Rt Hon Michael
Ward, John


Powell, William (Corby)
Wardle, Charles (Bexhill)


Redwood, Rt Hon John
Waterson, Nigel


Rendel, David
Watts, John


Renton, Rt Hon Tim
Wells, Bowen


Richards, Rod
Whitney, Ray


Riddick, Graham
Whittingdale, John


Rifkind, Rt Hon Malcolm
Wiggin, Sir Jerry


Robathan, Andrew
Wilkinson, John


Roberts, Rt Hon Sir Wyn
Willetts, David


Robertson, Raymond (Ab'd'n S)
Wilshire, David


Robinson, Mark (Somerton)
Winterton, Mrs Ann (Congleton)


Roe, Mrs Marion (Broxbourne)
Winterton, Nicholas (Macc'f'ld)


Ross, William (E Londonderry)
Wood, Timothy


Rowe, Andrew (Mid Kent)
Yeo, Tim


Rumbold, Rt Hon Dame Angela
Young, Rt Hon Sir George


Sackville, Tom



Sainsbury, Rt Hon Sir Timothy
Tellers for the Noes:


Scott, Rt Hon Sir Nicholas
Mr. Derek Conway and


Shaw, David (Dover)
Mr. Simon Burns.


Shaw, Sir Giles (Pudsey)



Shephard, Rt Hon Gillian

Question accordingly negatived.

Clause 112 ordered to stand part of the Bill.

Bill (Clause 36, 105, 112 and 139 and schedule 15), as amended, to be reported.

To lie upon the Table.

Orders of the Day — Health Service Commissioners (Amendment) Bill

Not amended (in the Standing Committee), considered.

Mr. Dennis Skinner: On a point of order, Madam Deputy Speaker. I do not think that you were in the Chamber during business questions, when I raised the issue of when the Scott inquiry report was to be published. The Leader of the House quite specifically replied—it has been carried by the media—that responsibility for the publication of that delayed report was down to Scott himself. I know that that is not true.
I do not know whether that reply was a slip of the tongue, but people outside are concerned that the House has been misled by the Leader of the House. This is the earliest opportunity that I have had to raise the matter, and I think that it is important to put on record the fact that the Leader of the House was wrong in his assertion that the publication of the report was down to Scott. In fact, it is down to the Government.

Madam Deputy Speaker (Dame Janet Fookes): The hon. Gentleman will appreciate that I cannot make a judgment on that matter, but of course he has made his point.

New clause 1

GUIDELINES FOR INVESTIGATIONS (MATTERS OF CLINICAL JUDGMENT)

In section 11 of the 1993 Act (procedure in respect of investigations) after subsection (6) there shall be inserted—

"(7) Without prejudice to the provisions of subsections (1) to (6) above, the Secretary of State may, after consulting the Commissioner and such representatives of health service professions as the Secretary of State thinks fit, by regulations made by statutory instrument make provision for the conduct of investigations which arise in consequence of the exercise of clinical judgment.

(8) Regulations under subsection (7) above may make provision for—

(a) the criteria to be used by the Commissioner in the selection of specialist medical advisers to assist him in that investigation;
(b) the level of proof necessary to satisfy the Commissioner that a complaint is justified;
(c) the circumstances under which the Commissioner may delay an investigation or refer it to another body; and
(d) such other matters as the Secretary of State thinks fit.".'.—[Mr. Galbraith.]

Brought up, and read the First time.

Mr. Sam Galbraith: I beg to move, That the clause be read a Second time.
As the House knows, and as I have said before, this Bill is an excellent advance for the national health service. The Bill is considered to be an extension of the complaints procedures and systems within the NHS, which are important. I think that it has another important role, which is to improve the standards of care in the NHS, and we should not underestimate its value in achieving that.
It is important for us to be clear about how the Bill will operate, and that is the basis of my new clause. There will be two consequences as a result of the Bill introducing clinical judgment into the competence of the commissioner. I suspect that many more complaints will be raised than the Government and the health service ombudsman have anticipated. However, there will be some disappointment for many complainants in that no clinical incompetence will be found in the majority of cases. I have had many medical negligence cases presented to me and, in my experience, in about 85 or 90 per cent. of the cases that I was asked to review, there was no case to pursue. That will probably be the case here.
If the system is to be seen to work properly, fairly and openly, while remembering that we are calling into question someone's clinical judgment, a number of factors should be put on record. From what I have read and heard, and from what the Under-Secretary, the hon. Member for Orpington (Mr. Horam), has said, I have absolute confidence in the ombudsman and believe that he will get it right. I have been impressed by his paper and by the various communications we have had. However, allowing for that, it would be nice to raise the issues that we hope that he will address.,
The first of the regulations that I am proposing in my new clause concerns the criteria that should be used by the commissioner in the selection of the doctors who will conduct the investigation. That is the crux of the matter. Doctors, obviously, have to be judged by their peers. The judgment of general practitioners will have to be judged by other general practitioners and the judgment of hospital consultants by other hospital consultants because of the various clinical judgments that are involved. If a complaint is raised against a registrar, obviously, the question of clinical incompetence will vary depending on whether a consultant is involved. If the ombudsman finds that a registrar made a decision that should have been made higher up the line, I hope that the ombudsman will not shirk from his duty. He should examine not just whether the person who made that decision had sufficient knowledge to do so, but whether it should have been made by someone higher up. That is important.
Another issue is the level of proof that will be necessary. That will be difficult because often there is a dispute about clinical judgment. I hope that that will be sorted out and that those who give the ombudsman advice will admit that there might be a dispute and that a reasonably large number of doctors would have done something one way and that other doctors would have done it another. We should recognise that there may be a dispute, which is the purpose of the second regulation that I have proposed.
The next issue is the one that worries me the most. The ombudsman suggested that when he raises a complaint, he might like to say he will not pursue it because it should be pursued by the General Medical Council or the courts as a case of medical negligence. The ombudsman should not have that power within his remit. He should have a case referred to him and he should investigate it. Should the complainant seek to pursue the case through the GMC or the courts, as the ombudsman has made clear, he should have the power to delay the case and to reconsider the matter. The ombudsman should not have the power to suggest that it should be pursued in another manner because he cannot make judgments about serious professional misconduct or negligence, which are matters for law.
Those are a few of the points that I wished to raise. The Bill is a worthwhile addition to the complaints procedure. We should look at it as a method of improving clinical competence. I hope that the ombudsman will listen to the points that we have made and take them into consideration when he is dealing with such cases.

The Parliamentary Under-Secretary of State for Health (Mr. John Horam): I am grateful to the hon. Member for Strathkelvin and Bearsden (Mr. Galbraith) for the manner in which he has presented the case. We had an extensive discussion on it in Committee, when he mentioned a number of points. As he will be aware, we do not believe that it is right to put the new clause into statute in the form that he has proposed. The hon. Gentleman has spoken of his confidence in the ombudsman, and we believe that the ombudsman should have the final say in such matters. As we know, the ombudsman has set out clearly in his report how he will consider these matters.
The points raised by the hon. Gentleman and delineated, one by one, in the regulations that he suggests are certainly worth studying and are extremely valuable. I can draw the ombudsman's attention to the hon. Gentleman's points and I am sure that he will study them with great care because they deserve attention. In the light of that assurance, I hope that the hon. Gentleman will be prepared to withdraw his new clause.

Mr. Galbraith: I thank the Minister for his reply. In the light of his comments and my confidence in the ombudsman, I beg to ask leave to withdraw the motion.

Motion and clause, by leave, withdrawn.

Clause 9

COMPLAINTS: REQUIREMENTS TO BE MET

Mr. David Hinchliffe: I beg to move amendment No. 2, in page 5, line 32, leave out 'In' and insert '—(1)'

Madam Deputy Speaker: With this it will be convenient to discuss amendment No. 1, in page 5, line 33, after 'complaints'), insert
'shall be amended as follows.
(2) After subsection (4) there shall be inserted
(4A) Without prejudice to the provisions of subsections (1) to (4) above, the Secretary of State may by regulations made by statutory instrument make such provision for the receipt of complaints as appear to him likely to expedite and facilitate the making of complaints.
(3)".%

Mr. Hinchliffe: As I said on Second Reading, the Bill has my full support. However, we need to examine the wider complaints procedure and some of the issues—perhaps policy issues—that lead people to make complaints. My amendments would provide a mechanism to improve the complaints procedure.
On Second Reading, I gained the impression that the Under-Secretary thought that there was some sense in what I had said. Indeed, he referred to my Yorkshire common sense, and that encouraged me to come to this Report stage and repeat some of my arguments. He may want to rephrase his remark when he responds later.
I shall explain why I want to amend the Bill at this stage. I was involved with the National Health Service and Community Care Act 1990 throughout its passage in the House. Unfortunately, the Act has caused considerable confusion among users of and complainants about the health service, as well as among those who work in the service, about the responsibilities of various elements of the NHS. Therefore, we need to simplify the complaints procedure, which is why I tabled the amendments.
On Second Reading I cited the example of a constituent who had a lump in her breast and was involved with four separate agencies during her treatment and after care. Her complaints related to three of those four agencies. Her complaints were serious and I felt that there should be a simpler method than having to write to each of the agencies. We need to consider how we can improve the system for people like my constituent who encounter serious problems with the care they receive.
I am sorry to see the Minister for Health leaving the Chamber. For some reason, whenever I get to my feet he leaves and then returns when he sees on the monitor that I have sat down. One of my arguments on Second Reading, which was not fully refuted by the Under-Secretary, was that the commissioner needs to examine the increasing examples of buck passing between the various elements of the NHS during the early stages of the complaints process. I have had experience of the purchaser blaming the provider, the provider blaming the purchaser, the hospital trust blaming the community trust and vice versa. With community care and continuing care, the NHS blames the local authority and vice versa. The whole issue of alleged bed blocking is a classic example.
We need to recognise that the climate surrounding the structure of the NHS has changed. Even with the improvements proposed in the Bill, I do not believe that the complaints procedure recognises the complexity of the new NHS, especially the internal market.
Another issue in my constituency and west Yorkshire generally is competition between similar providers, both for contracts for the provision of services and for patients themselves. That causes difficulties for patients who are referred from one hospital to another, yet those two hospitals are competing within the internal market. There are many arguments between providers in west Yorkshire. I represent Wakefield, which has arguments with Leeds because, within the internal market, it is removing services from Pinderfields hospital. Within the district, there are arguments between Pontefract general infirmary and Pinderfields hospital because of the competition for contracts. Therefore, patients who move between the hospitals for treatment are occasionally victims of that competition when they want to make a complaint. The Bill needs to include a mechanism for dealing with that competition which, on occasions, causes difficulties for people with legitimate complaints, many of which may end up in the hands of the health service commissioner.
7.15 Pm
I shall be interested to hear the Under-Secretary's response to another point that I raised on Second Reading. The role of the commissioner in examining the causal factors in a specific complaint is too narrow. My amendment would achieve a wider consideration of complaints within the commissioner's changed role.
Also on Second Reading, I made a point about resourcing arrangements that impact on patients' treatment. How does the commissioner's role fit into that? He needs to be able to consider the wider issues. Another example is fundholding, although I do not want to go into the merits or otherwise tonight. Nor shall I go into the merits or otherwise of the new resource allocation formula. My point is that occasionally those factors have a clear bearing on the serious complaints of patients, which may well end up in the commissioner's hands.
When I spoke on Second Reading, the Minister for Health left at the start of my speech and returned at the end of it. I asked him to read my speech. To my surprise, the best present I had for Christmas was a response from him showing that, to his credit, he had read my speech. I was not entirely happy with his letter, dated 19 December, in response to my comments about the Bill and the wider issues that I felt should be dealt with in Committee. I had made two points—the first, which I said I had made four times previously, related to fundholding. The Minister for Health wrote:
You claimed that complaints handling in the NHS is characterised by buck-passing. I presume that you were unaware that buck-passing was possible until this Government introduced a formal complaints procedure into the health service. It is ironic that you should make this claim during a debate to further strengthen and clarify the new complaints procedures.
You also claimed that Wakefield has lost resources. That, too, is nonsense.
I shall deal with those points in a moment or two. I was pleased to note that at the end of his letter the Minister said:
Seasonal greetings and best wishes for a better-informed 1996.
I reciprocated those greetings in a reply to the Minister, which the Under-Secretary may have seen.
It is difficult for me to argue the case for the amendments without referring in detail to some of the concerns in my area. I want briefly to explain why we need to widen the complaints procedure in the way proposed in the amendments. I am currently receiving complaints from patients relating to the two-tier system. I do not intend to go into detail about this matter, as I have done so on several previous occasions.
I have argued with the Minister and with the Secretary of State, and I have corresponded with both. I have met every agency concerned with the NHS in Wakefield, and I have got nowhere in looking at the role of the health service commissioner. Who is the referee in these affairs? Who can give me an objective and definitive view of what is happening?
I want to mention a specific case as an example of where constituents believe that the two-tier system is impacting upon their personal experiences. Pinderfields trust is the main provider in my constituency, and it has a current contract with Wakefield health authority for roughly 20,900 finished consultant episodes across all specialisms. The projected outturn at present is approximately 25,800, a much higher figure than the actual contract. Of the difference between the contract figure and the projected figure, some 3,500 are covered by additional funding, but the balance remains to be sorted out.
That is why people in Wakefield believe that they are experiencing a two-tier system. That is my view, but it is also the view of a number of GPs and—I suspect—that of a number of people who work within the health service in Wakefield. But I cannot prove that that is the case. Hon. Members with similar opinions end up in the Chamber bandying claims about, perhaps for political reasons and perhaps for genuine reasons of concern about constituents' experiences. Some of the cases that I have dealt with are certainly very negative.
There should be a mechanism whereby the commissioner, in investigating complaints, can look at some of the wider issues currently affecting my constituents and those of other hon. Members. I was speaking to the hon. Member for Salisbury (Mr. Key), who followed me at Health questions in November and made exactly the same claim in relation to fundholding and the two-tier system in his area as I was making for Wakefield. I am trying to address the principle, rather than simply the practical examples from my constituency.
In my view—I stress that it is my view—the commissioner has a role to play. Two-tier systems arise when there is a disparity in funding and, in this case, we have that between the district health authority and the fundholders. On the one hand, the fundholders are able to purchase, while on the other the district health authority cannot. There is either a disparity in funding or an imbalance between the elective and emergency contracts made with the provider trust. These issues must be looked at not by someone who is involved in the political arena, but by someone who is objective and has a role in investigating complaints.
The amendment points to the need to examine such problems in the context of specific complaints, and I appreciate that these complaints may be more serious than those that I have heard from my constituents which deal with orthopaedic operations and other operations that have caused discomfort. How do we get an objective evaluation of the resources available to fundholders compared with those available to non-fundholders in an area such as Wakefield? That will clearly have a bearing on the complaints that may well end up in the hands of the commissioner.
I turn briefly to buck-passing. The Minister of State wrote to me to say that it was nonsense to argue that buck-passing existed in the health service. I received that letter shortly after I received another letter from a local provider trust concerning a severely handicapped 16-year-old young man who was living with his family in the community in Wakefield. I felt that the letter was a classic example of a matter that could be addressed by the commissioner, or by the complaints procedure that would be introduced if the amendment is accepted.
I wrote on 14 November to the Wakefield and Pontefract community health trust with regard to the young man, who was severely disabled. I worked, as one or two people know, in social work for more than 20 years before I came to the House. The young man was one of the worst cases that I have ever seen living in the community and being cared for by parents. He is completely bedfast. He cannot feed himself, wash himself or dress himself. He cannot speak, and some people refer to him unkindly as a cabbage because, frankly, he can do nothing for himself. He is totally dependent on two extremely dedicated parents who have given up their lives to care for this young man.
The parents contacted me for the simple reason that they wanted respite care above and beyond the brief care that they had at the time. In short, they could see that if they did not get some more relief and support, they could no longer go on caring. I have seen young men like him before, but always in a hospital environment. I cannot recall seeing anyone as vulnerable and as multiply handicapped as that young man being cared for by parents within the community.
I wrote to the Wakefield and Pontefract community health trust to ask them to consider the request for additional respite care for the family, because I felt that if anyone was deserving of such care, these parents were. I asked the chief executive to do as I had done, and pay a personal visit to the family. Hon. Members will know that one can read and write about people, but until one sees the situation, one does not know what is going on. With permission, I will quote the chief executive's reply to me. While I will not go into great detail, I want to make an important point about a specific case that relates to the amendment. I shall not name the young man or his family. The chief executive's reply was dated 5 December, and said:
Thank you for your letter of 14 November.
I am sure that you are aware of the range of services which we provide, namely, Rose Garth Respite Care Bungalow and the Community Team: Learning Disabilities (Children and Adults) which provides care to many, many children, adults and families throughout the District. The volume of work we carry out and the value of the care and respite given to families is often not appreciated other than by those in receipt of care. The present staff and facility resources are now fully stretched. I do not believe there is any slack in any part of the service.
The Health Authority is fully aware of the demand for additional services and is familial with the number of families who are at the end of their tether. In their future plans they are sympathetic to funding additional services. It is now a matter of priority and funding, which can only be resolved by the Health Authority.
This Trust will respond quickly to the availability of additional funds and extend the service to those families in real need.
When that letter came to me, I had to ring the chief executive to ask, "What are you saying to me?" In short, he was saying, "It's not my problem. It is the problem of the health authority." I have written to the provider of existing respite services to ask for more. To me, this is a classic case of buck-passing. If it is not buck-passing, frankly I do not know what it is.
Having sent a copy of the letter to the family shortly before Christmas—they were not entirely happy, as one might imagine—I had to raise the matter with the health authority. My query to the Minister is, "Was I wrong to write to the provider of services to ask for more?" Do I need to raise every complaint or concern with the purchaser? If so, do we extend that to complaints received on community care, where the local authority is involved? Do I have to write to the Government, who provide the special transitional grant for community care funding? It strikes me that the principles at stake here would result in enormous complexity—even more than we have now—if they were followed to their obvious conclusion.
I am pleased to report that the outcome of this case has, eventually, been positive. The chief executive and the chair-designate of the Wakefield health authority visited the family, and were totally overwhelmed by the care and dedication of the parents. They then agreed to an extra 12 hours of respite care. Understandably, the family were aggrieved by the response of the trust, and my concern is

whether I handled the matter wrongly. Did I write to the wrong people? In future, should I write to the health authority on every issue? I have done that in the past, but have been referred to the provider.
I served on the Standing Committee dealing with the Bill, and I have been an Opposition Front-Bench member. I have been involved in the NHS for many years as vice-chair of a community health council and as member of a health authority. I have been actively involved in working in the NGS through social services. I am totally baffled, and I am supposed to know my way around the issue.

Madam Deputy Speaker: Order. Before the hon. Gentleman continues, may I remind him that he said that he was not going to go into too much detail. It is important that he makes only points that support his amendment. He is going very wide and I have been very tolerant owing to the nature of the subject under consideration.

Mr. Hinchliffe: I appreciate that you have been very reasonable, Madam Deputy Speaker. I think that you understand that, in illustrating why the amendments are necessary, I needed to go into such detail about individual circumstances.
7.30 pm
Finally on buck-passing, my amendment is aimed at improving the response to complaints, so that distress is not caused to families such as that of the constituent whom I mentioned.
In his reply to me, the Minister of State implied that I had misled the House about funding. When arguing that concern on Second Reading, I was simply pointing out that we need someone who is empowered to consider whether any funding issues have a bearing on a complaint. I was questioning, not whether we have enough money in the national health service—whatever the Government, we all accept that there will never be enough to deal with all the demand—but the Government's allocation formula for individual health authorities. That was my point on Second Reading and I do not think that the Minister of State fully understood it.
In my area—Wakefield health authority—the major purchaser of services such as those to which I referred has been told that the authority is over-funded to the tune of £7 million according to the Government's new formula. I will not go into detail about why the formula is wrong because you will not allow it, Madam Deputy Speaker. I mentioned that briefly on Second Reading and I was ruled out of order then. I simply must say, however, that the report of the district health authority of 20 December 1994 details the implications of the authority losing £7 million.
I moved the amendments because I believe that, if resourcing has a bearing on a complaint, it is appropriate for the commissioner to consider it, or for the complaints procedure to allow an objective overview by someone who understands the health service and is not a political figure, and who can conclude what is fair.
My area has been badly done to by the changes. The impact will come through this year. There will be more cases and I will have to write more letters about individual complaints. The commissioner has a role to play, if he can see objectively that we are getting a bad deal.
On that subject I shall conclude, Madam Deputy Speaker. Thank you for your tolerance and for allowing me to make those points. I hope that the Minister understands that I am simply asking that we consider ways in which we can clarify and simplify the complaints procedures. At the moment many people are going round in circles, including many hon. Members. If the hon. Gentleman reads the Second Reading debate, he will see that I had support from Conservative Members when I mentioned the huge increase in our work load since the internal market was introduced. We are writing letters that we did not have to write before. It is causing us work and it is causing our constituents many difficulties.

Mr. Horam: I referred to Yorkshire common sense when I dealt with the points raised by the hon. Member for Wakefield (Mr. Hinchliffe) on Second Reading. I also thought that Yorkshire qualities included a certain taciturnity, but that was not so evident this evening, I am afraid. None the less, the hon. Gentleman made some important arguments.
First, on complexity—a point that he has made strongly in the past—let me assure the hon. Gentleman that the idea of establishing the new three-stage procedure is to simplify and clarify the present complexity.
Secondly, if buck-passing exists, one of the functions of the ombudsman is to nail it. He is the final court of appeal and can certainly decide whether responsibility for something has been passed unreasonably between one authority and a general practitioner, or whatever the case may be. So, there is a recourse.
On the important subject of resources and the two-tier system and so forth, while it is obviously not the case that the ombudsman can look into general questions of resources, as that would be second guessing the national health service and its allocation of resources, he will be able to look into cases of individual hardship in which he considers that there might have been an unreasonable allocation of resources. I assure the hon. Member for Wakefield about that.

Mr. Hinchliffe: I am grateful for those comments. I was not clear whether, by an individual case, the Minister means that of a patient, a health authority, or both.

Mr. Horam: No, I am talking about the patient, because we are dealing with individual complaints.
I am afraid to say that the amendment is defective. I am sure that the hon. Gentleman tried hard to get it right, but it is difficult. It would change matters only for complaints made to the health service commissioner and the hon. Gentleman is concerned with complaints made at stages 1 and 2. Therefore, his amendment would not do what he wants it to do.
In the light of the hon. Gentleman's letter to me—I have it in front of me—as a consequence of my right hon. Friend the Secretary of State writing to him, and what he has said in the past half hour or so, I will consider what he has said and consider the letter and reply to him on the matters that he has raised. In view of that, I hope that he will withdraw the amendment.

Mr. Hinchliffe: I am grateful for the Minister's response. I recognise that the amendments have certain

technical deficiencies, but we have done our best to ensure a debate on some areas of concern. I think that the Minister understands our concerns, which are reasonable. On the basis of his assurance that he will write to me on those matters, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 10

REPORTS

Mr. Henry McLeish: I beg to move amendment No. 3, in page 5, line 44, at end insert—
'(2A) After subsection (1) insert—
(1A) Before making the report of the results of an investigation the Commissioner—

(a) shall send a draft factual summary of the matters investigated, excluding his findings and recommendations, to the person and body referred to in paragraphs (a) to (c) in subsection (1) above, and shall give them an opportunity to indicate any factual inaccuracies or omissions;
(b) may, for purposes specified by him, send to the person and body referred to in paragraphs (a) to (c) in subsection (1) above, a draft of either his findings or his proposed recommendations or both, but shall not send such draft to one party only.".'.


Again, I do not want to detain the House on this item. It was discussed extensively in Committee and the Minister has provided a helpful letter to my hon. Friends regarding the commissioner's views.
The amendment was tabled merely to ensure a completely level playing field. At present, the summary of facts is submitted to the complainant, but it was felt that all the details should be passed to the complainant at the conclusion of the case because the factual content of the initial summary provided to the complainant by the commissioner and that of the final report could differ.
Clearly, the ombudsman has said that he would be happier for the power to be left with him to allow him to use his discretion under section 11 of the Health Service Commissioners Act 1993 and we have the greatest confidence in Mr. Reid. No criticism is implied by our amendment; it is merely designed to find out whether the Minister wants to consider the matter further to ensure that we take away the feeling of bitterness and anger in any complaints procedure—the feeling that there is not a level playing field—which would surely help the procedure. I ask the Minister to respond on the basis of those brief comments.

Mr. Horam: I well understand the hon. Gentleman's point. Indeed, it was made with great strength and clarity in Committee. I said then what we could hope to do and I talked to the commissioner, Mr. Reid, about it. As a result, he wrote the letter.
In the light of the general concern in the House and in the Committee, I am prepared to take the matter a stage further—as a response to the amendment and the hon. Gentleman's comments. I will ask the commissioner to consider further his practice and invite the Select Committee on the Parliamentary Commissioner for Administration to look into, not only the question of the health commissioner, but that of the parliamentary commissioner—perhaps a larger part of the total


framework—and decide whether it is fully satisfied that the procedures that the commissioner has outlined are totally correct, and whether it should seriously consider moving towards the hon. Gentleman's suggestions and those made in Committee. Allowing a senior, important Committee of the House to consider the matter fully will take it forward in the appropriate way.

Mr. McLeish: That is a fair and positive response to the concerns of Opposition Members and of organisations such as the National Consumer Council. It satisfies us that the. matter should be reconsidered. It will be discussed by the Select Committee. We welcome the further wisdom of Mr. Reid. With those assurances, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Order for Third Reading read.

Mr. Horam: I beg to move, That the Bill be now read the Third time.
The proceedings on the Bill have, I am pleased to say, been marked by complete agreement on its fundamental objectives. The harmony between hon. Members has been a reflection of the general consent that the proposals have commanded in the NHS and among consumer groups.
I am grateful to the hon. Member for Fife, Central (Mr. McLeish) and his colleagues, such as the hon. Member for Rother Valley (Mr. Barron) and others, for their constructive attitude both this evening and throughout proceedings. I also thank my hon. Friends for their support for the Bill. I am grateful to the professions, which have adopted a constructive attitude, and to the ombudsman, who has been willing to make himself available to discuss the points that arose during our proceedings.
I am confident that, with stages 1 and 2, which we will take separate legislative action to implement, we have a new procedure which will ultimately be of great benefit to NHS patients.

Mr. McLeish: I agree with the Minister's comments. This is the third building block in the new complaints procedure and we wish it well in its implementation. As with many other things, there will be problems but if there is a consensus among professional groups and if the patients and families involved take the matter seriously and support the system, it will improve dramatically the health service complaints procedure.
In the commissioner, we have an excellent custodian of fairness. If he can ensure that what we have talked about is properly put into practice I have no doubt that the procedure will be a significant improvement for patients and help the health service. It illustrates to people outside that the House can agree on certain matters despite the fact that we tear each other apart on other aspects of health care.

Question put and agreed to.

Bill accordingly read the Third time, and passed.

Orders of the Day — Parish Councils (Fareham)

Motion made, and Question proposed, That this
House do now adjourn.—[Mr. Ottaway.]

Sir Peter Lloyd: As my hon. Friend the Minister knows, the Local Government Commission recommended the creation of two parish councils in the Warsash and Sarisbury wards of Fareham borough in my constituency. When my right hon. Friend the Secretary of State for the Environment made his response last March to the commission's proposals on Hampshire generally, and recommended to the House, inter alia, that the arrangements in Fareham should remain unchanged, it was naturally taken by those in Fareham who followed those matters, not least myself, as the end of matter—including parishing.
There was, therefore, considerable surprise, pleasant to some but unwelcome to many others, when in July, in response to a written question, the Secretary of State announced that parish councils were to be set up in the two wards. The shock for those opposed was all the greater because they had had no inkling that the Secretary of State was minded to come to such a decision or that he had power to do so without notice, debate or parliamentary approval such as is required for changes to district and county authorities.
I immediately met my right hon. Friend the Secretary of State and told him that I did not believe that there was the sort of local support that would justify the decision and hoped that he would consider with care the objections that I was sure that he would receive. Shortly afterwards, all parties on the borough council combined behind a motion to secure a reversal of the decision with 36 out of 38 councillors present voting for the motion and two abstaining. None was against.
The council observed that the meetings to discuss the possibilities of parishing had been sparsely attended and that the commission's consultation leaflet, issued after it had published its provisional recommendation, produced a response from seven people in Sarisbury and 12 in Warsash—insufficient numbers, the council noted, even to man the proposed parish councils in the wards in question.
In addition, the ward councillors stressed to me that their soundings made it clear that there was no general desire for parish councils; rather there was widespread opposition among those who knew of the decision—opposition which they believed would include the overwhelming majority of the local population when the inevitable extra charges were added to their council tax bills.
As my hon. Friend the Minister will remember, we have had a number of exchanges on the matter. In one, he conceded that his Department had received only six letters from the public on the issue, three opposing parishing in Warsash, two against parishing in Sarisbury and one in favour. He explained that my right hon. Friend the Secretary of State's decision was based on what he described as
the strong level of public support expressed to the commission during the consultation exercise.
He went on to say, reasonably—I am grateful to him for this—that, if there were clear evidence that the majority of the electorate in the two wards were against the proposed


parishing arrangements, he and his colleagues would certainly reconsider the decision. Meanwhile, he would delay implementation of the commencement order so that such evidence might be produced.
I told the six ward councillors of my hon. Friend the Minister's comments and explained that if they were to carry conviction, they would need to provide objective, additional evidence that could not be dismissed as hunch or hearsay. Petitions would not do; generally they are signed only by those in favour so those against are not recorded. Pleas in the press for letters to be sent in are usually ignored and there is no way of knowing whether the people who respond are representative.
The six councillors agreed to select three residential roads at random in each ward and call on every house, going back to houses where no one was in, so that they would have the view of a genuinely representative sample. I have already passed on the result of those surveys to my hon. Friend the Minister. They show that, of those responding in both wards, 84 per cent. were against parishing in Sarisbury and 77 per cent. against in Warsash; 2 per cent. were in favour in Sarisbury and 5 per cent. in Warsash. "Don't knows" were 18 per cent. in Warsash and 14 per cent. in Sarisbury. More than 200 households were canvassed in all.
It is significant that quite a number of those households were unaware that there was a proposal to give them a parish council. I believe that the survey is crucial because it is, I understand, the only genuinely random survey that has been conducted in the whole parish consultation exercise and its results are unambiguous, as my hon. Friend can see.
The Local Government Commission made no such study. After it had published its provisional recommendations for Hampshire, the commission circulated a leaflet with a tear-off reply slip to all houses. The leaflet described the commission's proposals concentrating, properly, on the options for the district and county councils and specifically asked for responses. Elsewhere in the leaflet, there was an easy-to-miss reference to the commission's parish recommendations across Hampshire, to which it did not specifically ask for responses.
The borough council observed that only seven replies were received from Sarisbury and 12 from Warsash. I am told by local councillors that they know of at least four other letters against the proposal that were sent to the commission. It was no doubt because they were not on the official slip that they were not included in the 19 responses I mentioned earlier.
The Local Government Commission did its work and made its provisional parish recommendation in its normal manner, not—this is vital to the argument—by trying to make its own assessment of local opinion. It did not regard that as its job. It thought that its job with parishing was to give a fair wind to proposals from local groups that convinced it that they had put together a well thought-out proposition, were seeking to involve local people and had evidence of some local support.
In that respect, the Warsash and Sarisbury residents' associations, with the advice and backing of the Hampshire Association of Parish Councils, deserve praise for setting the ball rolling, convening public meetings and

endeavouring to interest local residents in the issue. It was their proper role to do so and they obviously made great efforts to discharge it as well as they could.
Warsash residents held a public meeting in March 1993. Some 300 people attended, although many had left by the time a vote was taken and the decision to set up a steering committee to investigate the matter further was made with a comparatively small majority. Later that year, 2,000 questionnaires were distributed. Of those, 214 were returned-145 in favour of setting up a parish council and 74 against. A local census was also taken with similar results. It is worth noting that Warsash has more than 6,000 electors.
Similarly, the Sarisbury residents' association called a public meeting in June 1993, which representatives of the Hampshire Association of Parish Councils addressed. Some 20 to 30 people attended and agreed unanimously to set up a steering committee to examine further the proposition for a parish council. Many local organisations were then invited to send representatives to join the steering committee, and seven or eight did so.
The steering committee decided to place a questionnaire with a reply slip in the local free magazine, The Informer. It received 37 replies in favour and one against. The committee held a final open meeting in October 1993, at which the 20 to 30 people present decided unanimously to submit its proposal for a parish council to the Local Government Commission. Sarisbury has some 4,500 electors.
It is clear that both associations and steering committees made genuine attempts to involve the wider public and canvas residents' views and support, but, in the light of those figures, I am sure that my hon. Friend the Minister will want to look again carefully at the advice that he received that
there was a strong level of local support for parishing expressed during the consultative exercise".
Despite the spirited endeavours of the residents' associations, there was clearly very little.
There was undoubtedly some interest in parishing and, in the early days of the commission's work when all the talk was of boroughs amalgamating into larger, single-tier authorities, more people were prepared to see merit in a new, very local elected body. That mood passed with the Secretary of State's widely welcomed decision to leave the borough and county structure unchanged.
My hon. Friend the Minister will agree that that review of local government was special in that, unlike its predecessors, it sought to take note of local preferences. County and district councils are needed to deliver services efficiently and effectively, so the Secretary of State cannot surrender his final judgment on them to an opinion poll, however seriously he takes public opinion. With parishing, however, it is different. Parishes are not essential for providing services. If they were, there would be a national policy to set them up throughout the country. The uneven pattern of parish distribution clearly depends on history and local preference, not on utility or policy.
Parish councils are valuable in local communities that want them. I should be happy to have them in Warsash and Sarisbury if I were convinced that they would be welcomed, and so would the local councillors. Indeed, I have them in the rural Winchester parts of my constituency, where some city councillors also sit on


parish councils and find it rewarding and useful to do so. This debate, however, is not about the merits or otherwise or parish councils; it is focused narrowly on the question of local support for the Local Government Commission's recommendation for Sarisbury and Warsash.
On that essential point, local opinion is such that there is no basis on which the Secretary of State can reasonably confirm the order to set up the councils. I am sure that he does not want to impose them on an unwilling electorate. If he did, I fear that he would simply ensure that the majority thought extremely unkindly of him whenever it paid the extra on its council tax bills. However, I am certain that his objective in the matter is the same as mine: to ensure that his decision corresponds with the general tenor of local opinion.
My hon. Friend the Minister and the Secretary of State postponed implementation of the original recommendation so that they could look carefully at the evidence. If they still feel that they do not have enough, I should be glad if they would speedily commission some more independent research or studies on another genuinely representative sample, perhaps through the good offices of the Local Government Commission. I would be content with the suggestion, put to me in a personal capacity by the chairman of the Warsash residents' association, to hold an officially organised referendum. I suppose that it could be along the lines of a town vote, which used to be a feature of local government between the wars.
However, I am certain that no one—locally or in Government—would be in favour of another long, drawn-out consultation. Some of those most in favour of parishing would prefer a clear-cut decision soon, even if it is no, which, as I believe that I have shown, is the only decision that my hon. Friend the Minister can properly come to on the considerable evidence that I have put before him.

The Parliamentary Under-Secretary of State for the Environment (Sir Paul Beresford): I congratulate my right hon. Friend the Member for Fareham (Sir P. Lloyd) on his success in the ballot. I am genuinely delighted that he has used this opportunity to clarify many of the figures and spell them out succinctly, so that it will be possible to take them away and consider them again.
Until we can consider the points that my right hon. Friend has made, it is worth touching on the scene as we now see it. As he said, during the early stages of its review in Hampshire, the Local Government Commission

received proposals for the creation of seven new parishes, including the two that he mentioned this evening. Those proposals were put forward by local steering committees set up in Sarisbury and Warsash to look at the question of emparishing. Both groups held public meetings and conducted surveys, which provided some evidence that local residents supported the creation of parishes for both areas. My right hon. Friend covered that matter carefully. A report in the Local Government Chronicle of August 1993 said that business in Warsash favoured a parish council.
The commission consulted on all the parishing proposals when it included them in its draft report for Hampshire. As it received only one representation against the emparishment of Sarisbury and none against the emparishment of Warsash, it included both in its final report. The representations that we then received about the final proposals did not suggest that we would be justified in overturning the commission's recommendation for Fareham. Both those consultations took place against a background of draft and final recommendations for no change in the county and district structure in Fareham. My right hon. Friend the Secretary of State accepted the parish recommendations in his announcement of 11 July.
Following further correspondence from my right hon. Friend the Member for Fareham, we agreed to look again at our decision, should evidence be provided to show that the majority of the electorate was clearly against the parishing proposals. As my right hon. Friend said, Fareham councillors have now carried out surveys in selected parts of both Sarisbury and Warsash, the results of which suggest that the majority of the residents who were approached were against the proposed parishes. A cynic suggested to me that, because a letter went out earlier highlighting the levy of just one nearby parish, that could have influenced the response. At the same time, I also received letters that continued to support the recommendation and asked that we proceed with creating the new parishes.
I should like to take away the points that my right hon. Friend has made this evening, look at them carefully and put them before my right hon. Friend the Secretary of State, so that we may consider them before reaching a final decision. I am therefore grateful for the opportunity that my right hon. Friend the Member for Fareham has provided for us to look at this matter clearly and afresh, with the figures succinctly before us.

Question put and agreed to.

Adjourned accordingly at two minutes to Eight o'clock.